PRB 98-9E
CANADA-COUNCIL OF
EUROPE
PARLIAMENTARY SEMINAR, OCTOBER 1998
BEYOND NAFTA TO
A CANADA-EUROPE TRANSATLANTIC
MARKETPLACE: ISSUES AND PROSPECTS
Prepared by:
Peter Berg, Economics Division
Gerald Schmitz, Political and Social Affairs Division
November 1998
TABLE
OF CONTENTS
PREFACE
- NAFTA AND THE EUROPEAN UNION
SUMMARY
HIGHLIGHTS OF THE CANADA-COUNCIL OF EUROPE
PARLIAMENTARY SEMINAR, OCTOBER 1998
INTRODUCTION
October
19
CANADAS
NAFTA EXPERIENCE (DAY 1)
Panel
1 "Trade Issues and
the Dispute Resolution Mechanisms"
Panel
2 "Labour and Environmental Aspects of NAFTA"
Panel
3 "Social and Cultural Aspects of NAFTA"
October
20
CANADA
AND THE EU: TOWARDS A TRANSATLANTIC
MARKETPLACE (DAY 2)
Session
1 "Highlights of Canada-Europe
Trade and Economic Relations"
Session
2 "Sectoral Issues and Areas for Future Bilateral Agreement"
Closing
Session "Beyond NAFTA to a Canada-Europe Transatlantic
Marketplace"
APPENDIX
CANADA-COUNCIL OF EUROPE PARLIAMENTARY SEMINAR: PROGRAMME
BRIEFING
NOTES FOR CANADA-COUNCIL OF EUROPE
PARLIAMENTARY SEMINAR OCTOBER 1998
INTRODUCTION
DAY
ONE: CANADA'S NAFTA EXPERIENCE
(Briefing
Notes #1 - #7 by Gerald Schmitz)
PANEL
1: NAFTA TRADE ISSUES AND THE DISPUTE RESOLUTION MECHANISMS
NOTE
#1: THE NAFTA: ORIGINS, KEY ELEMENTS AND EVOLUTION
Origins
Key Elements
Evolution
APPENDIX
1: THE MAIN ELEMENTS OF THE NAFTA
APPENDIX
2: NAFTA'S INTERGOVERNMENTAL BODIES
NOTE
#2: THE NAFTA DISPUTE SETTLEMENT PROVISIONS:
STRUCTURES AND PERFORMANCE
How
the Dispute Resolution Institutions Work
The
Dispute Settlement Record from Canada's Perspective
APPENDIX:
CHAPTER 19 CASES BETWEEN CANADIAN AND U.S. PARTIES
PANEL
2: LABOUR AND ENVIRONMENTAL ASPECTS OF NAFTA
NOTE
#3: MANDATE AND DEVELOPMENT OF NAFTA'S
SPECIALIZED COMMISSIONS
The
NAAEC and the Commission for Environmental Cooperation
The
NAALC and the Commission for Labour Cooperation
Assessments
of the Side Agreements and Implementing Commissions
NOTE
#4: THE NAFTA AND ENVIRONMENTAL ISSUES
NAFTA
As a "Green" Agreement?
The
Environmental Record of NAFTA Institutions
The
Controversy over NAFTA's Investment Provisions
NOTE
#5: NAFTA AND LABOUR ISSUES
The
Record of NAFTA Institutions
NAFTA's
Impact on Labour
APPENDIX:
NAALC'S LABOR PRINCIPLES
PANEL
3: SOCIAL AND CULTURAL ASPECTS OF NAFTA
NOTE
#6: NAFTA AND SOCIAL ISSUES
From
"Social Dumping" to a "Social Charter"?
NAFTA
Impacts on Social Policies and Programs
NOTE
#7: NAFTA AND CULTURAL ISSUES
The
"Cultural Exemption" within the FTA/NAFTA
Protecting
and Projecting Culture beyond NAFTA
DAY
TWO: CANADA AND THE EUROPEAN UNION: TOWARDS
A TRANSATLANTIC MARKETPLACE
(Briefing
Notes #8 and #9 by Peter Berg)
SESSION
1: HIGHLIGHTS OF CANADA-EUROPE TRADE
AND ECONOMIC RELATIONS
Documentation
Department of Foreign Affairs - Fact Sheet
and Overview of Canada-
European Union and Economic Relations 1976 - 1997
(also accessible at http:www.dfait-maeci.gc.ca)
Joint Political Declaration on Canada-
EU Relations (December 1996)
and Prime Minister's Press Release on May 1998 Summit
Chapter by David Long, "Canada-EU
Relations in the 1990s" in
Canada Among the Nations 1998
SESSION
2: SECTORAL ISSUES AND AREAS FOR FUTURE
BILATERAL AGREEMENT
NOTE
#8: AN OVERVIEW OF CANADA'S CURRENT TRADE IRRITANTS
WITH THE EUROPEAN UNION
Introduction
Agriculture
Fish
Mining
Forest
Products
SESSION
3: BEYOND NAFTA TO A CANADA-EUROPE TRANSATLANTIC
MARKETPLACE
NOTE
# 9: STRENGTHENING THE TRANSATLANTIC
TRADE RELATIONSHIP
Introduction
Forging
Bilateral Links
Transatlantic
Free Trade: A Realistic Option?
APPENDIX
1: EXTRACTS FROM THE 1997 EUROPEAN PARLIAMENT RESOLUTION ON EUROPEAN
UNION RELATIONS WITH CANADA
APPENDIX
2: MEMBERSHIPS IN MAJOR EUROPEAN AND TRANSATLANTIC ORGANIZATIONS
CANADA-COUNCIL
OF EUROPE
PARLIAMENTARY SEMINAR, OCTOBER 1998
BEYOND NAFTA TO A CANADA-EUROPE
TRANSATLANTIC
MARKETPLACE: ISSUES AND PROSPECTS
PREFACE:
NAFTA AND THE EUROPEAN UNION
In a world of increasingly
internationalized economic activity, accompanied by a proliferation of
regional trade agreements, the two economic integration blocs that stand
out in terms of size and importance are the European economic community
and the North American free-trade area. The European Unions 15 member
countries, with a combined population of over 370 million people and GDP
approaching US$9 trillion, already constitute an enormous internal
market, and one that will grow substantially with the EUs expected
enlargement to over 20 countries. The EU is also the worlds largest
exporter of goods and services, and the second largest market for imports.
The three countries that are party to the North American Free Trade Agreement
(NAFTA) Canada, the United States, and Mexico do not constitute
a single market and disavow any political integration intentions. Still,
the NAFTA area is increasingly integrated in terms of business activity,
with corresponding impacts on domestic policy spheres including sensitive
matters of environmental, social and cultural regulation. The NAFTA entity
is also a potent force internationally, given its market size: almost
400 million people, GDP over US$11 trillion, and internal trade flows
of US$500 billion. NAFTA may also expand to include more countries.
EU and NAFTA policies have
a very large influence on the direction of the global trade and investment
regime, which is why it is so important that they be compatible with multilateral
principles and the rules of the World Trade Organization (WTO). Systems
of regional protectionism would lead to damaging competition. The relationship
between the two blocs is therefore also extremely important. As yet, however,
from the North American side the economic relationship with Europe has
proceeded along primarily bilateral tracks. Both Canada and the U.S. have
extensive and recently updated framework agreements with the EU; Mexico
is in the process of negotiating its own bilateral trade accord with it.
Some concern has been expressed in Canada that the bilateral path risks
becoming too much dominated by EU-U.S. priorities, thereby sidelining
Canadian interests and values. It has been suggested that a broader transatlantic
vision in needed from both the North American and European sides.
Whatever the merits of that
argument, it seems clear that, just as Canadians can benefit from understanding
the implications of economic developments in Europe, Europeans can gain
by understanding where Canada is coming from both in terms of developments
within North America and in terms of pursuing transatlantic objectives.
In this context a Canada-Council of Europe Parliamentary Seminar was held
in Ottawa in October 1998 on the theme "Beyond NAFTA to a Canada-Europe
Transatlantic Market Place." The following section gives the summary
highlights of that seminar.
SUMMARY
HIGHLIGHTS OF THE CANADA-COUNCIL OF EUROPE
PARLIAMENTARY SEMINAR, OCTOBER 1998
INTRODUCTION
On 19-20 October 1998, the
Canadian Parliament hosted a seminar on the theme "Beyond NAFTA to
a Canada-Europe Transatlantic Marketplace," jointly sponsored by
the Canada-Europe Parliamentary Association and the Sub-Committee on International
Economic Relations of the Council of Europe Parliamentary Assemblys
Committee on Economic Affairs and Development. The Council, based in Strasbourg,
France, is Europes oldest body dedicated to the goals of democratic
and social solidarity; 1999 marks the 50th anniversary of its
founding. Within the Assembly, national parliamentarians from 40 member
countries including all 15 European Union (EU) states and most
central and eastern European nations, including Russia participate
in its quarterly sessions, extensive committee work, and associated political-group
activities. Canadian parliamentarians have had observer status in the
Assembly since May 1997, and have used this to broaden the scope of their
involvement in addition to intensifying a longstanding relationship with
its economic affairs committee.
The idea for the Ottawa
seminar was first discussed with the new chair of this committee, Mrs.
Helle Degn, during the January 1998 Assembly session. Responding to the
initiative from their European counterparts to learn more about the North
American free-trade area from a Canadian perspective, Canadian parliamentarians
expressed a reciprocal interest that proposed also going beyond the NAFTA
to explore further prospects and policy options in particular,
the potential for a broader transatlantic economic arrangement that could
connect the increasingly integrated North American and European regional
blocs to their mutual benefit. The issues raised by the seminar
notably its concluding session, which considered the possibilities of
linking Canadian and European approaches in the context of complex, evolving
continental, inter-regional and global trade agendas have become
even more pertinent in the light of the agreement between the United States
and the EU reached in November 1998 on a "Transatlantic Economic
Partnership" Action Plan. The EU-Canada Summit of 17 December 1998
launched a new "EU-Canada Trade Initiative" but offered few
details. In these circumstances, how best can Canada improve its situation
alongside its NAFTA partners, while at the same time proceeding towards
a closer relationship with European partners?
The fourteen panellists
who addressed the seminar over its two days (see appendix 1 for the official
programme) contributed in different ways to helping formulate an informed
response to this question. But the debate also indicated that it will
be no easy matter to ensure that Canadian interests are protected and
promoted within regional integration and trade negotiation processes,
given the other powerful dynamics propelling increased engagement between
North America and Europe.
The seminars first
day was devoted to assessments of Canadas NAFTA experience; specifically,
three panels focused on the issues of: trade performance and dispute resolution;
environmental and labour mechanisms and impacts; and social and cultural
dimensions. In each panel there were three opening presentations, followed
by a lively question and discussion period. The Minister of Transport,
the Hon. David Collenette, also addressed participants over lunch. The
second day moved to consideration of Canada-Europe options for building
the transatlantic marketplace. Two morning panels held at the Department
of Foreign Affairs and International Trade examined the Canada-EU trade
and economic relationship, including some sectoral issues and areas for
future bilateral cooperation. As well, the Minister of Industry, the Hon.
John Manley, delivered a luncheon address on that theme. The final session
attempted to draw some overall conclusions as a basis for advancing the
policy agenda in the direction of a broader and deeper Canadian-European
trade partnership that will bolster the transatlantic bridge at a time
of great international transition and uncertainty.
What follows are brief summary
highlights from the six panel sessions over the two days of the seminar
(the full proceedings will be available as an edited transcript). We have
tried to focus on the ideas which are of most interest in terms of promoting
a forward-looking Canadian agenda within NAFTA, and beyond that, towards
a stronger transatlantic connection with Europe that is fully conscious
of the heightened global concerns affecting countries in both regions.
October
19
CANADAS
NAFTA EXPERIENCE (DAY 1)
Panel
1 "Trade Issues and the Dispute Resolution Mechanisms"
Speakers:
Dr. Michael Hart
Senior Associate, Centre for Trade Policy and Law
Carleton University and University of Ottawa
Mrs. Sally Rutherford
Executive Director
Canadian Federation of Agriculture
Mr. Gordon Ritchie
Partner, Strategico Inc.
Former senior Canadian trade negotiator
Michael Hart, who like fellow
panellist Gordon Ritchie was closely involved in the negotiation of the
Canada-United States Free Trade Agreement (FTA) over a decade ago, began
his presentation by underlining the importance of effective dispute resolution
as a Canadian trade policy imperative, not only in the bilateral context
but also multilaterally. Efforts have been ongoing to strengthen such
rules-based mechanisms in order to deal with the challenges of "deeper
integration." More is involved than just lowering trade barriers
and facilitating cross-border commerce; governments also need better ways
to manage relations among themselves and to conciliate varied business,
consumer and societal interests.
While getting U.S. lawmakers
to accept binding international procedures remains extremely difficult,
Mr. Hart argued that much progress has been made under the FTA and the
NAFTA through the innovative "chapter 19" system of binational
panels -- created under FTA and carried over into NAFTA to resolve
anti-dumping (AD) and countervailing duty (CVD) cases between the [two]
countries. Of the 35 cases litigated under the FTA, the only major exception
to this positive track record has been the long-running softwood lumber
dispute. As well, rather than talk of "winners" or "losers,"
Mr. Hart contended that dispute resolution working as it should, not only
makes the system more honest, but "has the wonderful benefit of drawing
governments back from policies that do not make much sense."
Under NAFTA, only 12 of
21 new chapter 19 cases have involved Canada, and there has been only
one such case (dealing with supply management in agricultural products)
under the chapter 20 general dispute-resolution procedure. The binational
system may be tested more often if economic conditions deteriorate. At
the same time, we are clearly benefiting from the stronger World Trade
Organization (WTO) dispute-settlement regime in place since 1995 (148
consultations involving 112 cases, with 20 final panel decisions to date),
which is on the whole "superior to what is in the NAFTA." According
to Mr. Hart, the trade-disputes system is working, but also still evolving
and open to improvements through future negotiations among member governments.
As cases multiply and the issues become increasingly complex, much can
also be learned from the European Union (EU) experience with a permanent
court that is able to provide more stability and confidence than the ad
hoc panels in NAFTA.
Sally Rutherford agreed
with the assessment that on the whole FTA/NAFTA dispute-resolution mechanisms
have served Canada well, for example in sectors like agriculture which
have continued to be subject to cross-border harassment. Given that the
panel system at least provides for a process that is more rational and
less driven by political pressures, it has "significantly increased
the confidence of the industry both in primary production and in the processing
industry." The FTA was the key breakthrough in that regard; NAFTA
added little to it.
Despite this advance, Ms.
Rutherford described examples from the recent annals of Canada-US agricultural
trade to illustrate how the political, and administrative trade-law systems
on each side of the border sometimes clash. Such problems not only persist,
but may increase as the inter-governmental regulatory environment becomes
more complex and at more levels -- e.g., different rules governing sanitary
or biotechnology issues in food products at the subnational (state/provincial),
federal, and in the case of the EU, supranational levels. NAFTA has worked
to minimize harassment, but when disputes "go beyond traditional
or historical legal or commercial problems, we have yet to see where that
fits in." A further difficulty for affected Canadian industries is
the growing expenses, for which American lobbies can marshall more resources,
which are now associated with litigating complicated cases.
The third panellist, Gordon
Ritchie, cautioned that how Canada-U.S. dispute resolution has worked
in practice reveals some "serious problems" with its functioning.
While it would be unfair to judge the system on the basis of its failure
to solve the contentious softwood lumber case, that case is significant
as being the biggest, longest-running, and still dominant bilateral trade
dispute. Unfortunately, the U.S. has steadfastly refused to dismantle
its offensive trade-remedies system. Under FTA/NAFTA rules it is, however,
at least obliged to apply its own law fairly. That is a significant improvement,
but it should not be expected to do more than restrain considerations
of national self-interest. Even with added WTO rules in place, U.S. domestic
operating practice often belies that countrys international commitments.
In the ongoing lumber dispute, Canada was simply lucky to win a crucial
panel decision that split 3-2 on national lines, and subsequent protectionist
truces can provide at best temporary relief. (For more details on this
context see background Note #2 in the seminar documentation prepared by
the Parliamentary Research Branch.)
A second key issue raised
by Mr. Ritchie was NAFTAs innovation with respect to investment-related
disputes, specifically provisions which allow U.S. corporations
on their own, without requiring the sanction of the U.S, government --
to pursue arbitral procedures against Canadian government authorities
alleging violations of their NAFTA rights. Ironically, this can give a
foreign company operating in Canada a recourse which would not be available
to a Canadian company. Several recent NAFTA investor-state cases brought
against Canada have provoked controversy, especially given that similarly
flawed provisions "have been bootlegged into proposals for so-called
multilateral accords on investment." (Again, for additional details
on this context and connection to the ill-fated MAI negotiations, see
background Note # 4.)
In the discussion period,
Mr. Terry Davis (United Kingdom) led off by inquiring about the state
of public support for or opposition to North American free trade. Panel
co-chair, Senator Sharon Carstairs, and other Canadian parliamentarians
present from different parties explained that it had been a highly emotional
political issue; indeed a dominant one during the 1988 election campaign
when the government was re-elected; public opinion polls had revealed
majority opposition to the original FTA though with important regional
differences. Labour unions and also certain provinces have led opposition
to the trade deals. (For a comprehensive history of this opposition see
Jeffrey Ayres, Defying Conventional Wisdom: Political Movements and
Popular Contention Against North American Free Trade, University of
Toronto Press, Toronto, 1998.)
Over the course of this
decade, public attitudes in Canada on free trade seem to have become more
relaxed and generally supportive. However, Mr. Ritchie observed that,
going beyond NAFTA, some very big issues, such as culture and trade, remain
unresolved, notably between Canada and the United States. Anticipating
the discussion in the afternoon panel, he argued that Canada must be very
firm in defending its values as a nation in such areas. This cultural
divide, and the need for Canadians to work with European colleagues to
address it multilaterally, was strongly reinforced by panel co-chair M.P.
Bill Graham (who chairs the House of Commons Standing Committee on Foreign
Affairs and International Trade which in 1999 will be conducting a major
study of prospective global trade negotiations).
Joining the discussion,
Mr. Hart underlined the added dimensions being brought to bear by "the
new political economy of international trade negotiations" in which
there are more players than ever before. Not only governments and business
interests are involved, but a widening spectrum of civil-society actors,
thereby linking the evolving trade and investment agendas to environmental,
social, human rights, and other normative objectives. The experience of
the MAI illustrates that it is no longer possible to ignore these concerns.
Reinforcing that point, Mrs. Durrieu (France) elaborated further on the
reasons for Frances withdrawal from the MAI talks which had been
scheduled to resume that very day in Paris.
Ms. Rutherford observed
pointedly that we have entered a period of globalization in which major
issues of sovereignty, governance, and coherence among proliferating international
agreements remain outstanding, and with unforeseen consequences. Summing
up their thoughts on developments beyond NAFTA, other panellists agreed
that important policy challenges lie ahead. Mr. Ritchie raised the question
of improving the distribution of benefits from trade liberalization, and
also the prospect of adding a "North Atlantic configuration"
to North American free trade.
Mr. Hart envisaged a continuation
of disputes over bilateral issues such as lumber, but was optimistic about
a progressive interaction of experimentation and consolidation through
plural regional and multilateral negotiating arenas. However, he was sceptical
about the potential for achieving substantive trade liberalization results
in the separate contexts of the proposed "Free Trade Area of the
Americas," APEC, or an emerging Transatlantic free-trade area (TAFTA).
In his view, a process of multilateral consolidation (i.e., moving matters
up to the WTO level) is more likely, driven by the very logic of the major
issues now under consideration.
On the future of that multilateral
trade agenda, Mr. Hart concluded:
Negotiators are used to
negotiating tariffs, quotas, anti-dumping rules and so on. They are
now being pressed to deal with equity distribution issues dealing with
labour, human rights, and environment through the trade window. This
is because that is the most advanced system of rules that is available
globally where there is some prospect of enforcing the rules
[and] makes for a more complex negotiating scenario that requires some
very thoughtful work on the part of academics and parliamentarians who
are thinking through this new world of trade negotiations.
Panel
2 "Labour and Environmental Aspects of NAFTA"
Speakers:
Ms. Jeanine Ferretti
Interim Executive Director
Commission for Environmental Cooperation (CEC)
Mr. Peter Bakvis
Conféderation des syndicats nationaux (CSN)
Ms. Michelle Swenarchuk
Canadian Environmental Law Association (CELA)
Jeanine Ferretti began by
explaining her agencys origin, subsequent to the NAFTA agreement
being reached, as being part of a further response by the three governments
to concerns that NAFTA even with the inclusion of some "green"
provisions could lead to a worsening of environmental conditions,
weakening of environmental regulation, and erosion of public accountability.
The environmental "side accord" which created the CEC affirmed
three principal objectives: avoidance of trade and environment disputes;
effective enforcement of environmental laws; addressing environmental
issues of common concern. The CEC itself has a tripartite structure which
includes a unique public advisory committee. While acknowledging that
the CEC gets mixed reviews from the environmental community, Ms. Ferretti
outlined an activist trilateral work program in key areas such as transboundary
pollution, trade-environment linkages, and environmental law enforcement.
An ongoing weakness of the
NAFTA institutions, as a recent performance review concluded, is that
"thus far the trade agenda is operating on a very separate course
of interests and business from the agenda of the environmental commission."
However, the CEC does possess innovative mechanisms which allow citizen
complaints to be brought forward for a factual determination. According
to Ms. Ferretti, the three governments recognize that more has been accomplished
in terms of environmental cooperation than in dealing with the complex
and contested terrain of trade-environment issues. She indicated that
the most interesting challenge to the CEC may be the most recent allegation,
brought by a coalition of Canadian environmental and labour groups, that
NAFTAs chapter 11 investor-state arbitration process is jeopardizing
its environmental objectives. This has triggered an internal examination
between the CEC and NAFTA structures that will be a very important test
case to watch.
Turning to NAFTAs
labour side agreement, Mr. Peter Bakvis outlined a number of concerns
expressed by the labour movement during the NAFTA negotiations: potential
job and wage losses, weakening of labour laws, and erosion of social protection
measures. The NAFTA agreement was strongly criticized for lacking any
concrete reference to worker rights or social standards. Unlike the situation
in Europe, NAFTA proposed integration with a developing country in which
average salaries were barely 10% of Canadian levels. Matters had improved
with the election of the Clinton administration, resulting in a complementary
labour cooperation "side accord." The U.S. had also introduced
an adjustment assistance program, though none was forthcoming in Canada.
The North American labour
commission which was set up is similar to its environmental counterpart
in affirming some laudable principles. However, it lacks a public advisory
component and suffers in comparison to European structures for defending
economic and social rights. No common norms are established, and enforcement
of existing national laws remains especially problematic in Mexico (where
the purchasing power of the minimum wage has dropped 30% since 1994).
Mr. Bakvis argued that the complaints procedures are also narrow and weak,
with violations of certain key rights i.e., freedom of association,
collective bargaining -- being subject only to consultations among NAFTA
governments. Accordingly he recommended strengthening these structures
by: incorporating obligations to adhere to core international labour rights
(specifically seven fundamental conventions of the International Labour
Organization); making non-compliance subject to sanctions; and establishing
regular consultative mechanisms with NGO, labour and business representatives.
Michelle Swenarchuk returned
the focus to the environmental and health effects of a decade of FTA/NAFTA
experience. Her prognosis was not optimistic, given her account of how
successive trade treaties, notwithstanding considerable public opposition,
have in fact circumscribed the grounds for public-interest protection.
She cited several disputed cases (including a successful Canadian challenge
of EU standards banning hormone residues in beef, and the U.S.-based Ethyl
Corp.s successful suit against Canada under the NAFTA investment
chapter) to illustrate how in her view trade-biased interests have been
allowed to prevail over other public-policy values in legislation
"We have seen this ever-enlarging number of areas of legitimate public
policy where the deregulation of trade and the agreements are having the
effect of blocking governments from taking legitimate action."
Referring to French Prime
Minister Jospins announcement of Frances withdrawal from the
MAI negotiations, Ms. Swenarchuk observed the important difference between
an inter-governmental delegation of sovereignty, as in the controlled
framework of the EU, and the ceding of sovereignty to private international
corporate interests. As for the structures of the international trade
and trade-disputes system, she argued for much greater "transparency,"
including public rights of access, and also for effective parliamentary
oversight and accountability. She was encouraged by the opportunities
for Canadian-European alliances which could be developed to advance such
a timely political and democratic reconsideration of the future direction
of the trade regime.
In the discussion period,
responses to pointed questions from Mr. Davis confirmed the limited and
uneven record of NAFTA institutions from a labour and environmental perspective,
even if establishing cooperative mechanisms for both has been a step forward.
Ms. Swenarchuk also observed in regard to the Ethyl case cited earlier
that, regardless of the merits of the governments strategy in defending
itself against the lawsuit, the expansion of the concept of "expropriation"
as defined in the NAFTA and proposed for the MAI exposes governments to
growing private challenges to public-interest regulation as well as demands
for compensation that exceed what would be acceptable under pre-existing
domestic and international obligations dealing with commercial arbitration.
Mrs. Durrieux, elaborating on French opposition to the MAI, concurred
that such investor-state provisions have become imbalanced in favour of
private versus public interests.
Following up a question
from Mr. Daniel Turp M.P. about the evolution of a "North American
Community," referred to in recent speeches by Canadian foreign minister
Lloyd Axworthy but as yet little debated publicly, there was a brief discussion
of scenarios leading from NAFTA towards greater hemispheric integration
along with negotiations [note: currently being chaired by Canada] on a
proposed Free Trade Area of the Americas (FTAA). Mr. Bakvis observed that
MERCOSUR, led by Brazil, envisages a process that is closer to the European
integration model in its attention to the social dimension. Mr. Behrendt
(Germany) wondered about the extent of NGO networking across borders in
paying attention to environmental issues among others. And Mr. Gusenbauer
(Austria) asked what should be the fate of the MAI. Ms. Swenarchuk indicated
that strong links and social alliances, aided by the Internet, are developing
among international NGOs. On the subject of free trade in the Americas,
she argued that "the FTAA process will be used to implement the WTO
agreements across the hemisphere and speed their implementation."
On post-MAI options, she concluded that: "If it dies at the OECD,
it will resurface at the WTO"; however, she agreed with many others
who "always have been opposed to the WTO encroaching further into
national sovereignty by negotiating an investment regime."
Panel
3 "Social and Cultural Aspects of NAFTA"
Speakers:
Dr. Brooke Jeffrey
Concordia University
Mr. Keith Kelly
Former Executive Director
Canadian Conference of the Arts
Mr. David Crane
Journalist, The Toronto Star
Professor Brooke Jeffrey
began by observing some fundamental differences between the chosen paths
of NAFTA and EU integration. In the case of the former, there had never
been any intention of combining political and social with economic integration.
She said Canadians especially are concerned with preserving national identity,
and referred to the current governments defence of measures to protect
Canadian magazine publishers in the face of American challenges, raised
by panel co-chair Senator Lorna Milne in her opening remarks. Within Canada,
where provinces have important jurisdiction in social matters, there had
been a vigorous debate over the effects of free trade, globalization,
fiscal cutbacks, and other factors on social cohesion. But, unlike Europe,
there was no framework at the NAFTA level for social policy considerations,
much less any social agenda based on common values and goals.
There is a NAFTA clause
which allows each country the right to adopt any measures with respect
to social services established for a public purpose. However, this reservation
is of arguable force and has yet to be clearly tested in a dispute-resolution
case. Indeed it is difficult to measure social effects, for good or ill,
as being directly attributable to NAFTA. Taking a broader outlook, Ms.
Jeffrey suggested that positive civil-society coalitions are nonetheless
beginning to emerge among the three countries. Moreover, there appears
to be a convergence among the value-sets of the regions citizens
(with Canadians putting the highest value on "tolerance," Americans,
on "independence," and Mexicans, on "responsibility"),
although such harmonization also seems due mainly to global influences
not NAFTA. If citizens as well as elected officials are able to interact
and participate more in a NAFTA context, perhaps we will see a growing
basis and opportunity for advancing social-charter type concerns in years
to come.
Keith Kelly observed a similar
difficulty with trying to measure NAFTAs impact on Canadian culture.
He also suggested that the ongoing focus on Canadas "cultural
exemption" obtained in the FTA/NAFTA may be somewhat misplaced, since
a decade of experience has revealed plainly that such provisions offer
scant protection "the cultural exemption only works if the
Americans decide to respect it." In fact, they have shown no sign
of letting up on their right to retaliate against what they consider to
be discriminatory Canadian cultural measures, and recently (as in the
magazines case) they have been able to appeal to the WTO, in which "there
are no cultural filters for the dispute settlement mechanism to use to
treat a cultural dispute any differently than it would a dispute in traditional
trading commodities."
On a positive note, Mr.
Kelly referred to international networking taking place, notably with
European counterparts, to develop alternative formulations (such as the
concept of a "charter of global parallel rights" in the area
of culture) which can lead to durable solutions that preserve autonomous
cultural expression within a beneficial global trade and investment environment.
As he concluded: "We certainly hope that the international consensus
on culture will develop to the point where we might be successful during
the [WTO] millennium round at finding a solution to the issue of how we
protect those values that are most important to us as nations."
David Crane saw the impact
of the FTA/NAFTA on socio-cultural trends as being linked to developments
in the Canadian economy being driven by the dynamic evolution of international
business activities and emerging communications technologies. He pointed
to the actual or prospective entry of U.S. private service-providers in
a number of areas e.g., health, education, corrections -- which
have traditionally been the preserve of the public sector. The larger
context of globalization also in his view constrains governments
ability to raise taxes to finance social objectives. In Canadas
case, cultural objectives will also be at stake in forthcoming WTO negotiations,
notably in the services area, and probably getting underway in the year
2000 following the ministerial summit which the U.S. is hosting in late
1999.
Reinforcing comments by
Mr. Kelly, Mr. Crane observed that Canada must be creative as well as
vigilant in developing realistic options with like-minded countries, since
the U.S. has signalled its contrary determination to make cultural industries
further subject to general trade rules, and not to grant culture any special
status. Mr. Crane suggested that both Canadian and Europeans could do
a better job of building alliances in the face of such American challenges.
What Canada is seeking is not to restrict the cross-border flow of cultural
products (indeed much of the Canadian consumer market is dominated by
foreign culture), but to maintain "viable space for Canadian cultural
industries to profitably serve the Canadian public" across the full
range of media. In Mr. Cranes view, the commercial aspect of this
is critical to the survival of Canadian media, which do not enjoy the
huge domestic market and economies of scale of their American competitors.
Unfortunately, he contended,
the FTA/NAFTA provisions have done nothing to shield Canadian culture
from U.S. challenges and threats of retaliation. So if NAFTA evolves further
in the direction of deeper integration, there is cause for worry. And,
as fast-developing modes of electronic commerce and the Internet create
new implications for culture and trade, Canadians and Europeans need to
find ways of working together on what promises to be one of the most critical
issues of the next WTO round.
Leading off the discussion
period, Mr. Caccia asked how it has come to pass that commercial and trade-driven
considerations seem to dominate so much of international relations and
diplomacy, to the detriment of social values. Can this powerful trend
be constrained? In response, panellists referred to the profound effects
of both a technological revolution and an ideological revolution in favor
of de-regulation and privatization. Mr. Crane argued that, while it is
not realistic to return to some traditional protectionist past, there
are elements of a "counter-revolution" in the making. Governments
are not powerless by any means, and there is increased attention to addressing
"democratic deficits" at a number of levels. In the wake of
the Asian financial crisis, even institutions like the IMF are recognizing
that "global financial deregulation may have gone too far."
The dilemmas of globalization and "global governance" are now
a major topic of discussion in international fora.
On culture and free trade,
Mr. Davis said he understood Canadian worries about the overwhelming influence
of American television and film, but queried whether Canadian defences
of the domestic magazine industry were not simply subsidizing publishers
profits, some of dubious merit. Mr. Kelly and Mr. Crane elaborated on
reasons why so-called "split-run" editions of U.S. magazines
threaten the viability of smaller Canadian publishers.
Mr. Jan Figel (Slovakia,
Chair of the Subcommittee on International Economic Relations), contrasted
the NAFTA drive for competitiveness with the principle of solidarity which
has guided the construction of a multinational European community in the
post-war, and now post-Cold War, period. He asked: "Is there any
institutionalized vision for solidarity in North American relations and
NAFTA in particular?" Mr. Crane replied that there was none. The
Clinton administration did create a North American Development Bank to
get NAFTA passed through Congress, but as it dealt only with U.S.-Mexico
border projects, Canada declined to participate. Lately, Foreign Affairs
Minister Axworthy has been promoting the concept of a North American Community
(see an earlier reference in Panel 2 and also background Note # 7), which
appears to be primarily focused on education. However, Mr. Crane was doubtful
about this initiative, especially given the Canada-U.S. philosophical
differences over social and cultural policy. [*Note: in a recent essay
comparing North American and European patterns of "continental"
integration, Canadian international relations scholar Stephen Clarkson
offers an insightful perspective on the transatlantic possibilities arising
out of an emerging "NAFTA-EU axis."(1)]
Other interventions pursued
the issue of the design of evolving trade arrangements, and how the rights
of governments would be affected; for example, Clifford Lincoln M.P. cited
the undue power of big U.S.-based corporations as manifested in the Ethyl
case and in the cultural field. Mr. Crane returned the onus to the governments
which, after all, negotiate and agree to these trade deals -- "governments
have more power than they like to think they have." Continuing on
the subject of social and cultural consequences, Mr. Gusenbauer questioned
the merits of a transatlantic marketplace "more or less functioning
on the basis of NAFTA terms. (
) If NAFTA terms do not offer better
social and environmental possibilities, why start to negotiate at all?
If it is not better than the WTO, what is the comparative advantage?"
In struggling with this
question, panellists agreed that international negotiations around such
issues will be extremely difficult. On the cultural issue, which is also
a major problem for Europe, making any progress will depend on changing
the attitude of the United States. In emphasizing this point, Mrs. Francine
Lalonde M.P. followed up an earlier query about the future of cultural
"exemptions," and described this as a challenge which Canada
shares with all European countries, not just those in the EU. Mr. Kelly
was not optimistic about change in the U.S. bargaining position, but nevertheless
strongly urged that Canada work closely with like-minded countries through
the WTO process to achieve practical proposals for safeguarding cultural
objectives.
In bringing the discussion
to a close, Mr. Caccia wondered about the efficacy of adding new social
or cultural clauses into trade agreements in light of the unimpressive
record of the NAFTA labour and environmental commissions to date. Mr.
Gusenbauer also questioned the "soft language" that tends to
get used in dealing with such problems of the trading system: "When
it concerns profits, there is strong weaponry, but when it concerns fundamental
human and social rights, we talk in terms that are very cloudy."
Mr. Davis pointed out that the European Union does at least have a more
enforceable supranational framework through the European Convention of
Human Rights.
In a final comment, Dr.
Jeffrey observed the difficulty of getting the U.S. to accept such multilateral
jurisdiction, and more generally, of negotiating social issues among such
disparate partners. NAFTA remains a very limited instrument in this regard,
and the EU will likely also be challenged by similar problems in its negotiations
with Mexico and other Latin American partners. At the same time, both
Mr. Kelly and Mr. Crane held out hope for carrying forward forms of intergovernmental
cooperation specifically, Canadians and Europeans working together
on some of these issues -- that can make a real difference in how this
new era of global commerce and enormous technological change is managed
in ways that promote rather than undermine important societal and cultural
values.
Looking beyond NAFTA, this
aim now has to be regarded as a crucial part of the transatlantic and
the global challenge facing Canada and Europe into the new millennium.
October
20
CANADA
AND THE EU: TOWARDS A TRANSATLANTIC
MARKETPLACE (DAY 2)
The second day of the seminar
turned the focus from the NAFTA experience to a discussion of current
and future Canada-EU relations in view of the need for a strengthened
transatlantic commercial relationship. Improving existing bilateral ties
in specific areas is a key consideration, as was brought forward by parliamentarians
who spoke both in the morning sessions held at the Department of Foreign
Affairs and International Trade and the closing session on Parliament
Hill. Beyond this is the question of how to build more effective bridges
between North America and Europe, -- and perhaps to go as far as the construction
of a Transatlantic Free Trade Agreement (TAFTA).
Session
1 "Highlights of Canada-Europe Trade and Economic Relations"
Speakers:
His Excellency Jean-Pierre
Juneau
Canadian Ambassador to the European Commission of the European Union
Mr. Alfred Gusenbauer
(Austria)
Member of the Subcommittee on International Economic Relations and
former Chair of the Social, Health and Family Affairs Committee of
the Council of Europe Parliamentary Assembly
After introductions by co-chairs
Mrs. Francine Lalonde M.P. (Vice-President, Canada-Europe Parliamentary
Association) and Mr. Jan Figel (Slovakia, Chair of the Subcommittee on
International Economic Relations), Ambassador Juneau led off with an upbeat
portrait of the current state of Canada-EU relations. Among the optimistic
characteristics of the relationship which he presented were the following:
-
Fourth,
the stock of EU direct foreign investment in Canada, comprising fully
65% of non-U.S. direct investment in Canada, grew to $37 billion mark
in 1997.
Maintaining this positive
perspective, Ambassador Juneau pointed to even more prosperous transatlantic
links in the future, including services trade. Science and technology
is another strongly performing area. In his view as well, the introduction
of the Euro would enhance Canadian trade through a reduction in exchange-rate
risk as well as indirectly through the beneficial impacts of European
economic and monetary reforms. Moreover, as the EU will enlarge over the
long-term, so too will Canada-EU economic relations, aided by longstanding
Canadian trade ties with some of the candidate countries.
Mr. Juneau expressed confidence
that Canada can look forward to a strong economic partnership with an
EU market that is already the worlds largest. At the same time,
Canada has to continue to work hard to achieve improved access to the
EU market through mutual recognition agreements and other means. Canada-EU
economic links will grow even stronger as the barriers to trade are removed.
From the European side,
Mr. Alfred Gusenbauer argued that the future of Canada-EU relations depends
largely on global market conditions. There was certainly a need for regional
relationships within this global setting; to that end, the transatlantic
marketplace could play a key role, but would have to be considered carefully
on its merits. The issue of how to combine multiplying regional trade
pacts with an overall multilateral approach came up at several points
during the days discussions. In addition to the various trade talks
between the European Union, NAFTA countries, and other Latin American
countries, notably the MERCOSUR bloc, the co-chairs of this session, Jan
Figel (Slovakia) and Mrs. Francine Lalonde M.P., also made reference to
Canadas launch of negotiations with the European Free Trade Association
(EFTA) and the Central European Free Trade Area (CEFTA) initiative.
Such trade questions, Mr.
Gusenbauer insisted, must be considered against the backdrop of some fundamental
political and governance challenges confronting the global economic system.
In order to deal with the current international financial instability,
he called for changes to take place with respect to international institutions
in essence, a new Bretton Woods arrangement. In particular, he
sought more coordinated global currency arrangements and was of the opinion
that the move to a single, stable currency in Europe could help to ensure
greater global stability. Mr. Gusenbauer went on to register his support
for the WTOs "Millennium Round," but noted that a truly
comprehensive round of trade and investment talks would need to be launched.
Mr. Gusenbauer argued forcefully
that "democracy is a main and essential prerequisite for the development
of a market economy that takes into consideration wealth, growth and development."
Accordingly, the trend towards greater globalization must also be accompanied
by increased democratization. Too much decision-making power was being
left in the hands of corporations or international organizations such
as the International Monetary Fund (IMF) and World Bank; legislators needed
therefore to make their voices more influential and to make their governments
more accountable for the actions taken by these organizations. This view
was shared by other seminar participants, particularly Mr. Povilas Gylys
(Lithuania), Mr. Wolfgang Behrendt (Germany), and Mr. Benoit Sauvageau
(M.P., Canada). Mrs. Helle Degn (Denmark), Chair of the Council of Europe
Assemblys Economic Affairs Committee again emphasized the point
in her remarks at the conclusion of the mornings second session.
The discussion period also
raised a number of questions about the actual state of progress in developing
Canada-Europe trade prospects. Senator Jerahmiel Grafstein noted that
Canadian trade with continental Europe (in percentage terms) was on the
decline, and that an acceleration of the Canada-EU Action Plan was being
met by a lukewarm response in Brussels. Would not the creation of a transatlantic
free-trade zone inject some dynamism into this situation and serve as
well as a useful first step in the achievement of multilateral trade liberalization
at the WTO? Responding to that observation, Mr. Gusenbauer queried whether
such a "transatlantic marketplace" would necessarily be in Canadas
interest: "Have you analyzed the effects the transatlantic marketplace
will have on Canada specifically?" He wondered whether in a new transatlantic
arrangement EU companies would not be more inclined to deal with U.S.
firms than with those of Canadian origin.
Prompted by a question from
Mr. Terry Davis (United Kingdom) on the extent of progress achieved on
the Canada-EU Action Plan, Ambassador Juneau pointed to a number of bilateral
agreements already entered into (e.g., on standards, customs, science
and technology). According to Mr. Juneau, it is possible that more progress
has been made in Canada than in the U.S. on their respective Action Plans.
However, given the U.S.-EU bilateral trade discussions [note: which subsequently
resulted in a Transatlantic Economic Partnership Action Plan being adopted
on November 9], he also acknowledged that:
Canada is not yet part
of the transatlantic marketplace. First, the Americans do not want us
to be part of it, and I think it is important to understand that. The
Americans do not want to have us in the Transatlantic Business Dialogue
either, and obviously the Europeans were quite happy not to have us
as part of that process.
It also came out that there
have been problems and delays in completing the Canada-EU Joint Trade
Study envisaged in the 1996 Action Plan to identify trade barriers. Ambassador
Juneau nevertheless maintained that Canadian policy is on course. In his
view, in the absence of any framework that would allow a collective NAFTA-EU
negotiation to go forward, the best approach is to carry on with existing
bilateral efforts, at the same time looking out for where there might
be possibilities for convergence or for a simultaneous trilateral negotiation
with the Americans and the Mexicans.
[*Note: On 2 December
1998, in a comprehensive presentation of Canadian trade policy and objectives
leading into prospective WTO negotiations, Canadian International Trade
Minister Sergio Marchi reiterated his view before the House of Commons
Standing Committee on Foreign Affairs and International Trade that the
aim of a Canada-EU partnership should be that: "when Europe looks
to North America it sees a NAFTA community not just three different neighbourhoods."
Canadas clear preference, he argued, is that "Europe should
be seen to be negotiating with all three of us at the same time."]
Session
2 "Sectoral Issues and Areas for Future Bilateral Agreement"
Speakers:
Mr. Jason Myers
Senior Vice-President and Chief Economist, Alliance of Exporters and
Manufacturers of Canada
Mr. John Colfer
President and Chief Executive Officer, CORANCO Corporation
Co-chairs, Ms. Aileen Carroll
M.P. and Mr. Roy Cullen M.P., introduced the session by highlighting some
of the challenges and opportunities for Canada in progressing beyond historic
trading patterns towards more diversified and dynamically expanding market
relations with European partners. As Ms. Carroll asserted: "The principal
growth industries are financial services, knowledge-based industries and
environmental technology. Trade irritants involve primarily transactions
in primary products. Consequently, it behooves us to focus on bilateral
trade initiatives in those growth sectors which are not encumbered by
unresolved trade irritants." Mr. Cullen noted the reservations expressed
in the previous days panels about whether NAFTA, given some of its
inherent problems, "really was the template for transatlantic trade."
As well, he urged giving attention to issues of anti-corruption and economic
crime which are crucial to improving business prospects in central and
eastern Europe.
Jason Myers focused his
remarks on the structural changes that have taken place across Canadian
industry since the advent of freer North American trade and which include
a move to greater product specialization, corporate integration, and improved
cost efficiency. Increasingly, firms are assuming world product mandates,
albeit still with a decidedly U.S. focus. According to Mr. Myers, what
this means in practice is that the economic growth resulting from free
trade in North America is driving Canadian companies to satisfy a sizeable
portion of their skilled labour, technology and information requirements
from other regions such as Europe. Canada is also attracting increasing
amounts of investment from European sources. He therefore cautioned the
audience about adopting a strictly bilateral approach to the trade liberalization
and business opportunities that are available. Rather, businesses need
to take advantage of the global marketplace and discussions surrounding
transatlantic trade need to mirror those at the global level.
John Colfers presentation
vigorously supported the successful conclusion of strengthened bilateral
agreements between Canada and the EU to attain more compatible tariffs,
to eliminate non-tariff barriers between the two entities, and to improve
the transatlantic investment climate. He also pointed to the "information
deficit" that small and medium enterprises (SME) faced regarding
international business opportunities, but was optimistic that the federal
government was starting to address the situation. Mr. Colfer also echoed
the views of Canadian Trade Minister Marchi in expressing his belief that
"community-to-community negotiations for fairer, more balanced bilateral
agreements are fundamental to long-term benefits for Canada and the EU.
Such agreements would allay fears of protectionism which come about as
a result of separate negotiations between the EU and the U.S. and the
E.U. and Mexico and could serve to stabilize world trade."
In response to a comment
by Mr. Caccia on the merits of entering into a TAFTA-type arrangement,
Mr. Davis described how little enthusiasm there was in Europe for the
idea. Later, in the afternoon session, he elaborated by saying that in
the European mind, "transatlantic marketplace" refers to an
EU-U.S. axis; in other words, one dominated by Brussels and Washington,
and not including Ottawa. On the other hand, Mr. Davis was quite interested
in the status of the Canada-EU Joint Trade Study now in progress. Ambassador
Juneau revealed that the release of the document was being delayed by
an inability to arrive at common conclusions regarding the most appropriate
approach to trade liberalization. Owing to this impasse, the Ambassador
foresaw the eventual publication of a separate Canadian, as opposed to
a joint, document.
A concluding comment from
Mrs. Degn revealed some of the challenges which need to be overcome if
the current trade discussions are to move to a higher level:
We need an institutional
framework, and that is what you are missing in your regional NAFTA framework.
In response to Mr. Caccia, I say: It is difficult for Europeans to engage
in a regional cooperation when you are proclaiming that you need to
institutionalize the mechanisms. It is difficult for us, but it is not
unreachable. You have to work on your regional agreements; we have to
work on ours. And we have to link them in some way at some time. (
)
Who does profit from these agreements?
We have to think in longer
political terms to gain results that will make our voters the winners.
Closing
Session "Beyond NAFTA to a Canada-Europe Transatlantic Marketplace"
Speakers:
Hon. Allan J. MacEachen
Senator (retired),
Former Deputy Prime Minister,
Minister of Finance and of Foreign Affairs
Mr. Terry Davis
Member of the House of Commons, United Kingdom
Former Chair of the Economic Affairs and Development Committee of the
Council of Europe Parliamentary Assembly
Senator Allan MacEachen
launched the final session of the seminar by putting Minister Marchis
recent comments about the construction of a more inclusive transatlantic
relationship within the context of a useful historical perspective on
Canadas economic relations with Europe. He noted that the 1976 Framework
Agreement on Commercial and Economic Co-operation between Canada and the
EU was a product of the economic nationalism in vogue in Canada at the
time. The attempted diversification of Canadian economic activities away
from the U.S. (towards Europe and elsewhere) became known as the "Third
Option"; the first two being the status quo, and increased integration
with the U.S. But, even though "the prime minister made a huge investment
in the European opening
. Nothing much happened in terms of revolution,
at least in our commercial policy, for a long time." Mr. MacEachen
went on to observe that the forces driving closer Canadian economic integration
in North America certainly distracted Canada from Europe throughout much
of the 1980s. The Canada-U.S. Free Trade Agreement (FTA) which ushered
in an historic policy shift was then furthered consolidated by the NAFTA.
Nonetheless, attempts have
been made during the current decade to bolster what some saw to be a flagging
Canada-Europe relationship. These have had difficult moments; notably
the "chilling effect" of the fisheries dispute between Canada
and Spain. Canada has had to learn that "faced directly with the
economic power of the European Union, we were not in an advantageous bargaining
position." Mr. MacEachen suggested that, whereas in 1976 Canada was
seeking European support to attenuate U.S. economic dominance, now the
converse might be coming true. Although the political climate at present
is not propitious for Prime Minister Chrétiens proposed TAFTA, its
time may yet come (as far back as the 1950s Lester Pearson put forward
the idea of a North Atlantic trade agreement); "patience is required."
In the meantime, important benefits can still be seized by Canada through
both the bilateral efforts already described which should include
both old and new friends within the European family of nations -- and
the new multilateral round of trade talks.
Mr. MacEachen closed by
remarking that in a period of high turbulence, such as we are experiencing
in the wake of the Asian crisis, problems must be addressed both by getting
"the domestic fundamentals correct" and "by a profound
debate about the operation of the international financial system and the
implications of enthusiastic applications of globalization."
Mr. Terry Davis (former
Chair of the Council of Europe Parliamentary Committee on Economic Affairs
and Development) was blunt in throwing cold water on the current prospects
of a TAFTA. In his view, the construction of only one bridge across the
Atlantic (TAFTA versus three separate bilateral processes), although preferable,
is very doubtful in reality because "I do not think that the United
States government is going to accept it." He observed that: "When
politicians in Europe talk about transatlantic, they really mean United
States of America. That is an extremely important point that Canadians
and Mexican need to appreciate." Ambassador Juneau had appreciated
that in his morning presentation. The fact is that the central negotiating
path will be directly between the U.S. and the EU towards a new bilateral
relationship between the two economic superpowers. This strengthened relationship
would then set the stage for a common approach to the 1999 multilateral
discussions at the WTO.
In fact, Mr. Davis
prophecy has already come to pass. As the introduction to these summary
highlights has already pointed out, a new "Transatlantic Economic
Partnership" (TEP) Action Plan between the two economic giants was
agreed to in November 1998. Mr. Davis ventured that it might be more useful
for Canada to work closely with Mexico, rather than to seek to engage
the U.S., in "trilateralizing" a relationship with the EU: "If
I were a Canadian Member of Parliament, I would be pressing for trilateral
discussions, given that America will not allow it to be quadrilateral,
but the third party would be Mexico rather than the United States."
He also offered an incisive comment on the TEP proposal (since adopted):
Having gone through the
draft in detail, it looks to me as if the transatlantic economic partnership
draft action plan is really about the European Union and the United
States of America coming together to adopt a joint approach in the discussions
in the WTO in the next year, culminating in the ministerial conference
in December 1999. It is about how they can come to a common position
that would be imposed not only on Canada but also on the rest of the
world. If some people think that this is rather similar to the discussions
we have had about MAI, they would be absolutely right, except that it
is not OECD, a handful of countries; it is one economic bloc, the European
Union and the United States of America.
At the same time, Mr. Davis
argued forcefully that Canada is not without options of its own. He advised
Canada to use its bilingualism to advantage in Brussels and to "try
to cultivate some new friends and look to the future rather than to the
current situation
not just to Germany (the example of bilateral
ties cited by Mr. MacEachen) but also to the Czech Republic, Poland, Hungary,
and some of the others who will be in the European Union but in the meantime
share the same feelings that you have about being left out of the discussions."
Mr. Davis regretted the delay in putting out the planned Canada-EU Joint
Trade Study since, as he put it: "If your friends at the Council
of Europe want to defend your interests inside the European Union and
in the rest of Europe, then your friends need to know the facts."
In the wrap-up, there was
further emphasis on forging alliances that cross the Atlantic, not only
to promote trade and wealth creation, but in socially-conscious ways that,
in Mr. Figels words, help "to build a real community of values."
Mr. Gusenbauer observed that the "realpolitik" of U.S. dominance
ought not to diminish the successes of Canadian diplomacy. Mr. MacEachen
mentioned his first hand experience that, when dealing with its superpower
neighbour, Canada has sometimes been freer than its European counterparts.
From the European side,
Mr. Gonzalez-Laxe (Subcommittee rapporteur for the seminar) expressed
satisfaction with the rich record of the two days of discussions; in particular
the thought-provoking questions raised about NAFTAs future evolution,
the need to develop institutional and parliamentary frameworks for managing
common transatlantic economic interests, and the choices facing Canada
in navigating between the economic superpowers of the EU and the U.S.
From the Canadian side, Mr. Caccia was grateful for the contributions
of all participants and, noting in particular the frank interventions
by Terry Davis, reaffirmed a Canadian dedication to some day turning the
"elusive policy goal" of a transatlantic "third option"
into a reality.
APPENDIX
PROGRAMME
CANADA-COUNCIL OF EUROPE
PARLIAMENTARY SEMINAR
"Beyond NAFTA to
a Canada-Europe Transatlantic Marketplace"
OTTAWA, 19-20 OCTOBER 1998
Monday October 19, 1998 - Day 1
"CANADAS NAFTA
EXPERIENCE"
8:00 8:30 Registration
Room 160-S, Centre Block
8:00 8:20 Formal
Convocation COE Economic Affairs Subcommittee
(Private to Subcommittee members)
8:20 8:45 Opening
Statements
8:45 - 10:30 Panel 1 "Trade Issues
and the Dispute Resolution Mechanisms"
Room 160-S
Chairperson(s):
Hon. Sharon Carstairs
The Senate of Canada
Dr. Bill Graham, M.P., Toronto Centre-Rosedale
Chair, House of Commons Standing Committee on Foreign Affairs and International
Trade
Panellists:
Dr. Michael Hart
Senior Associate, Centre for Trade Policy and Law
University of Ottawa and Carleton University
Ms. Sally Rutherford
Executive Director, Canadian Federation of Agriculture
Mr. Gordon Ritchie
Partner, Strategico Inc.
10:30 10:45 Break
10:45 - 12:30 Panel 2 "Labour and
Environmental Aspects of NAFTA"
Room 160-S
Chairperson(s):
Hon. Charles Caccia M.P., Davenport
President, Canada-Europe Parliamentary Association and
Chair, House of Commons Standing Committee on Environment and Sustainable
Development
Panellists:
Ms. Jeanine Ferretti
Interim Executive Director, Commission for Environmental Cooperation
Mr. Peter Bakvis
Conféderation des syndicats nationaux
Ms. Michelle Swenarchuk
Canadian Environmental Law Association
12:30 - 14:00 The Hon. David Michael
Collenette
Minister of Transport
Room 253-D
14:00 - 15:15 Question Period in House
of Commons
15:30 - 17:30 Panel 3 "Social and
Cultural Aspects of NAFTA"
Room 160-S
Chairperson(s):
Hon. Lorna Milne
Senate of Canada
Hon. Lucie Pépin
Senate of Canada
Panellists:
Dr. Brooke Jeffrey
Concordia University
Mr. Keith Kelly
Former Executive Director, Canadian Conference of the Arts
Mr. David Crane
Economics reporter, The Toronto Star
18:00 Reception for participants
Room 256-S
Tuesday October 20, 1998 - Day
2
"CANADA AND THE
E.U: TOWARDS A TRANSATLANTIC MARKET PLACE"
9:00 - 10:30 Session 1 Highlights
of Canada-Europe Trade and Economic Relations
Robertson Room (Department of
Foreign Affairs and International Trade)
125 Sussex Drive
Chairperson(s):
Mrs. Francine Lalonde,
M.P., Mercier
Vice-President, Canada-Europe Parliamentary Association
Mr. Ján Figel (Slovakia)
Chairman of the Sub-Committee on International Economic Relations
Council of Europe Parliamentary Assembly
Panellists:
Ambassador Jean-Pierre Juneau
Canadian Ambassador to the European Commission of the European Union
Mr. Alfred Gusenbauer (Austria)
Member of the Sub-Committee on International Economic Relations
10:30 10:45
Break
10:45 12:15
Session 2 Sectoral Issues and Areas for Future Bilateral Agreement
Robertson Room (Department of
Foreign Affairs and International Trade)
125 Sussex Drive
Chairperson(s):
Ms. Aileen Carroll, M.P.,
Barrie-Simcoe-Bradford
Roy Cullen, M.P., Etobicoke
North
Panellists:
Dr. Jayson Myers
Senior Vice-President and Chief Economist
Alliance of Exporters and Manufacturers of Canada
Mr. John Colfer
President, CORANCO Corp.
12:15 12:30 Mrs.
Helle Degn (Denmark)
Chair, Committee on Economic Affairs and Development
Council of Europe Parliamentary Assembly
12:30 13:45 Working Lunch with
Keynote Address by Honourable John Manley Minister of Industry
Lester B. Pearson Hospitality
Centre (Department of Foreign Affairs)
125 Sussex Drive 9th
floor
13:45 14:00 Shuttle Back to Parliament
Hill
14:00 - 14:30
Question Period in the Senate
15:00 17:00
Concluding Session: "Beyond NAFTA to a Canada-Europe Transatlantic
Marketplace"
Room 160-S
Chairperson(s):
Hon. Jerahmiel Grafstein
Senate of Canada
Speakers:
Hon. Allan J. MacEachen
Senator (retired)
Former Minister of Finance and Deputy Prime Minister
Mr. Terry Davis (United Kingdom)
Leader of the U.K. Delegation to the Council of Europe Assembly and
Former Chair, Committee on Economic Affairs and Development
17:00 Closing Remarks
Hon. Charles Caccia, M.P.
President, Canada-Europe Parliamentary Association
Mr. Fernando Gonzalez-Laxe
(Spain)
Rapporteur of the Sub-Committee on International Economic Relations
18:00 Reception
sponsored by the Canada-Europe Parliamentary Association and the National
Capital Commission
National Capital Information Centre (opposite Parliament Hill)
BRIEFING
NOTES FOR CANADA-COUNCIL OF EUROPE
PARLIAMENTARY SEMINAR OCTOBER 1998
INTRODUCTION
On 19-20 October 1998 a
Canadian parliamentary seminar was held on the theme "Beyond NAFTA
to a Canada-Europe Transatlantic Marketplace," jointly sponsored
by the Canada-Europe Parliamentary Association and the Sub-Committee on
International Economic Relations of the Council of Europe Parliamentary
Assemblys Committee on Economic Affairs and Development. Forty countries
now belong to the Strasbourg-based Assembly, Europes oldest body
dedicated to the aims of democratic and social solidarity, which marks
its 50th anniversary in 1999. National parliamentarians from
all 15 member states of the European Union and from most central and eastern
European nations, including Russia, participate in its quarterly sessions
and committee activities. Canadian parliamentarians have had observer
status in the Assembly since May 1997.
The idea for this seminar
developed out of European counterparts desire to learn more about
the North American free-trade area from a Canadian perspective, and a
reciprocal Canadian interest in exploring, in addition to the existing
NAFTA, further options that could lead towards a broader transatlantic
economic arrangement of mutual benefit to the increasingly-integrated
North American and European regional blocs. Accordingly, the Canada-Council
of Europe Parliamentary Seminar focused on these aims, with a view to
stimulating a dialogue between Canadian and European counterparts that
could point to common interests and options for advancing transatlantic
economic relations. The first days panels addressed key dimensions
of Canadas evolving NAFTA experience. The second day was devoted
to Canadas commercial relations with Europe and prospects for developing
closer transatlantic partnerships.
Below is a slightly revised
version of a series of briefing notes prepared by the Parliamentary Research
Branch for seminar participants. The notes by Gerald Schmitz introduce
the theme and cover many aspects of Canadas evolving NAFTA experience,
including the record of dispute resolution institutions, associated environmental
and labour cooperation bodies, and the relationship to social and cultural
policy issues. The notes by Peter Berg concentrate on Canada-European
Union trade issues, both bilaterally and looking towards the prospects
for a transatlantic free-trade area that would advance Canadian interests
and be compatible with shared North American and European objectives at
the global level. Included as well are selected references to other documentation
sources and some related electronic links.
DAY
ONE: CANADAS NAFTA EXPERIENCE
(Briefing
Notes # 1 - # 7 by Gerald Schmitz)
The following three sets
of briefing notes for Day One of the Canada-Council of Europe Seminar,
October 1998, review some of the most important aspects of Canadas
participation in NAFTA. The notes for Panel 1 explain the genesis of the
agreement, its principal elements, and trends since its entry into force
nearly five years ago on 1 January 1994. These notes also look at
NAFTAs dispute resolution mechanisms and the patterns of trade disputes
involving Canada under the NAFTA regime. Going back to the early 1980s,
a primary rationale for Canadas pursuit of continental free-trade
rules was to obtain security of access to U.S. markets. Although cross-border
trade volumes have greatly increased, that objective has been at best
only partially achieved. While promoting trade and investment flows is
NAFTAs chief purpose, the agreement also broke new ground through
the attachment of two "side agreements" on environmental and
on labour cooperation. The notes for Panel 2 outline the work of the commissions
set up to implement these agreements and comment on the debate over the
record of the NAFTA with respect to environmental issues and labour standards.
NAFTA has also proved controversial in terms of perceived or potential
impacts which could put at risk Canadas system of social protections
(e.g., public health care) and policies to safeguard culture. The notes
for Panel 3 look at the NAFTA debate as it affects these areas of government
intervention and democratic choice.
PANEL
1
TRADE ISSUES AND THE DISPUTE
RESOLUTION MECHANISMS
NOTE
#1: THE NAFTA: ORIGINS, KEY ELEMENTS AND EVOLUTION
(2)
Origins
Canada took the crucial
first step towards NAFTA when the Conservative government of Brian Mulroney
decided to pursue bilateral free-trade negotiations with the United States
in the mid-1980s. Although the talks nearly failed and the 1988 Free Trade
Agreement (FTA) was extremely controversial, it provided the template
for the subsequent development of continental free-trade arrangements.
The FTA with the U.S.s northern neighbour also spurred its southern
neighbour, Mexico, to request its own free-trade negotiations in 1990.
Three-quarters of Canadian exports were to U.S. markets but Mexico was
nearly as dependent, with two-thirds of its exports destined for those
markets. Strong geopolitical interests were also at stake. As those bilateral
talks proceeded, Canada became concerned that FTA gains not be eroded,
and that an outcome be avoided in which a U.S. "hub" would enjoy
more advantages than the separate "spokes" of either free-trade
partner. In early 1991 the negotiations were trilateralized at Canadas
request.
Canada subsequently moved
from a mostly defensive posture to a proactive stance open to the inclusion
of new issues and a broader regional trade liberalization agenda. The
trilateral process also meant that Mexico, despite its very different
level of development and political system, had to accept reciprocal obligations
comparable to those of the Canada-U.S. FTA if it wanted to be treated
as an equal partner. Mexican President Salinas was committed to a market-driven
economic development model which accepted the increasing internationalization
of trade and investment flows and responded to the competitive pressures
arising from transnational business strategies. Indeed, the NAFTA as a
whole, which received its strongest support from business groups in the
three countries, should be seen as part of a more general trend towards
expanded market liberalization regionally and globally, with rules disciplining
the behaviour of governments accordingly.
By the end of 1992, the
three governments had successfully concluded negotiations and signed a
NAFTA agreement. However, by this time there was a new Democratic administration
in the United States. The negotiation of additional parallel accords during
1993 on environmental cooperation, signed in August and on labour
cooperation, signed in September was mainly motivated by President
Clintons attempt to assuage American concerns over Mexican environmental
and labour conditions. But, although Congress then narrowly ratified the
NAFTA, a majority of Democrats still voted against it. By the end of 1993
Canada also had a new Liberal government with concerns about NAFTA, notably
in regard to the continued application of U.S. trade-remedy laws (i.e.,
antidumping and countervailing duties on Canadian exports). A joint political
statement agreed to establishing working groups on these irritants prior
to the Canadian Parliaments approval of NAFTA legislation. The treaty
itself came into effect as scheduled on 1 January 1994.
Key
Elements
The NAFTA establishes a
free-trade area among the three countries, not a customs union or common
market, much less an economic union. This means that the parties to the
agreement remain free to pursue distinctive trade policies towards non-member
states; complex "rules of origin" determine which goods and
services are sufficiently North American to qualify for preferential NAFTA
market terms. There is little in the way of formal requirements to harmonize
other economic policies, or adjustment mechanisms to deal with economic
dislocations. Nor is labour mobility addressed, apart from some provisions
to facilitate the temporary entry of business and professional persons
in liberalized sectors. However, NAFTA is a very comprehensive and far-reaching
treaty, extending the principle of "national treatment"
which obliges governments not to discriminate between domestic and foreign
producers further into areas of services trade, government procurement,
and investment. NAFTA is designed to promote the freer regional movement
of goods, services, and capital, and therefore accelerates competitive
conditions in the three countries, except where it is explicitly stated
that NAFTA rules do not apply.
Among noteworthy features
of the NAFTA are the following:(3)
-
Phased elimination
of tariffs on trade in goods: for Canadas trade with the U.S.
this was completed on 1 January 1998 according to the previous FTA
schedule; for trade with Mexico it should be virtually complete by
2003. There have been several agreements to accelerate tariff reductions;
the latest in April 1998. However, rules of origin establishing North
American content were made stricter than the FTA for textiles, apparel,
and automotive products.(4)
-
Substantial
liberalization of trade in services and opening up of government procurement
contracts, including those for services and construction. Compared
to the FTA, all services are included unless explicitly excluded.
Several annexes set out existing or future measures at the federal,
state or provincial levels that each country has chosen to "reserve"
(i.e., exempt) from NAFTA provisions.
-
Increased
protection for investors as well as for intellectual property rights.
U.S. and Mexican investors are subject to a preferential review threshold
under Canadas foreign investment screening regulations (currently
only direct acquisitions above about $170 million). In addition,
the NAFTA establishes a controversial investor-to-state arbitration
procedure which allows private-sector firms to sue governments for
alleged breaches of NAFTA rights. It has been invoked several times
against Canada (see briefing Note #4 on NAFTA and the environment).
NAFTAs investment code has also been held up as a prototype
for the Multilateral Agreement on Investment (MAI) being negotiated
at the OECD.
-
On energy,
Mexico was able to retain its constitutional provisions on exclusive
public ownership, and is also not subject to the carried over Canada-U.S.
FTA provision whereby each party must make available a proportion
of the restricted energy supply in the event of energy shortages.
However, Canada issued a unilateral declaration in December 1993 that
"interprets the NAFTA as not requiring any Canadian to export
a given level or proportion of any energy resource to another NAFTA
country."
-
On agriculture,
U.S.-Mexico and Canada-Mexico trade was substantially liberalized.
Canada retained its quota-based system for supply-managed commodities
(dairy and poultry products); however, Canada subsequently accepted
"tariffication" and liberalization of this sector as a result
of the 1994 Uruguay Round GATT agreements. Canadian agricultural exports
and import policies have continued to be subject to U.S. challenges.
(In September 1998, Canada requested consultations under both NAFTA
and the WTO over border actions by U.S. states to block Canadian trucks
carrying cattle, swine and grain. Agricultural and rural impacts have
also been controversial in Mexico, and were cited as a factor in the
1994 uprising in the state of Chiapas.)
-
Each countrys
right to set health, safety, environmental and other standards as
it deems necessary is recognized, and there is language to the effect
that standards should not be lowered. However, the force of these
protections is debatable. The side agreements on environment and labour
establish additional procedures to strengthen enforcement of national
standards but Canadas coverage by these agreements is subject
to substantial provincial consent. (See briefing notes for Panel 2.)
-
Canada keeps
the exemption for cultural industries (publishing, films, etc.) it
negotiated in the FTA. However, this still allows for commercial retaliation,
and in light of continued U.S. challenges it is arguable how much
protection it affords. (See briefing note for Panel 3.)
-
Establishment
of an ongoing set of institutions for settling trade and investment
disputes, replacing and elaborating on the FTAs temporary provisions.
Although Canada secured agreement to continue working towards a more
satisfactory set of common rules that could prevent many disputes,
NAFTAs complex system of arbitral panels is based on each countrys
fully retaining its trade-remedy laws. U.S. challenges to certain
Canadian exports (notably lumber, steel, pork, wheat, sugar, and other
commodities) have remained costly and persistent. (See Note #2 on
trade disputes.)
The NAFTA is considerably
more institutionalized than was the Canada-U.S. FTA. It is overseen by
a Free Trade Commission composed of cabinet-level representatives, and
there are also ministerial-level commissions governing implementation
of the environmental and labour accords. Under the main Commission, there
is a secretariat composed of national sections. A trilateral "coordinating
secretariat" to assist the Commissions work was established
in Mexico City in late 1997. Below that, some 30 intergovernmental
committees, working groups and other subgroups are active in following
up various aspects of NAFTA provisions (see appendix 2 for a complete
listing).
The sufficiency of NAFTA
institutions is debatable. According to Stephen Randall: "The failure
under NAFTA to establish an umbrella organization which might take decisions
buffered somewhat from the vagaries of domestic politics in any of the
countries reflects the very traditional nature of the NAFTA agreement
and the mutual jealousy of national sovereignty that exists among its
members."(5) However,
a recent report done for NAFTAs Montreal-based Commission for Environmental
Cooperation suggests that an extensive intergovernmental "NAFTA regime"
is developing which "has shown clear signs of significantly altering
the breadth, depth and path of cooperation among the three countries."(6)
Some NAFTA critics have compared it unfavourably to European economic
community institutions in its failure to adequately address social dimensions
(see Note #6). However, adding social provisions to NAFTA would likely
require additional transfers of sovereignty to the trilateral level, and
would come up against complaints, which will sound familiar to European
ears, that NAFTA rules are already too intrusive into areas of national
jurisdiction and that NAFTA intergovernmental bodies are too technocratic
and removed from democratic control.
Evolution
It seems clear that the
NAFTA has boosted trade and investment flows within the North American
region, and that there is Canadian reliance on those flows. Over 82% of
Canadas 1997 merchandise exports and over 70% of imports were with
NAFTA partners; almost all of this accounted for by the $1.4 billion in
daily cross-border commerce with the United States. By comparison, Canadian
figures for trade with the EU are only 5% of exports and 10% of imports.
Services trade with the U.S. is also over $50 billion annually. Trade
with Mexico has increased 80% since 1993, but still accounts for less
than .5% of Canadian exports, though imports from Mexico have grown to
2.5%. Investment flows among NAFTA partners have increased substantially
to over $200 billion. Again, although Canadian investments in Mexico have
multiplied, for Canada investment is primarily U.S.-oriented. U.S. investments
account for about two-thirds of the total stock of foreign direct investment
(FDI) into Canada.
Government and business
studies claim that NAFTAs first years have been associated with
positive job creation overall. However, labour organizations and other
critics contend that the unemployed have not been helped and that thousands
of good manufacturing jobs have migrated southward as a result of low-wage
competition and corporate restructuring within an integrated North American
market. Independent analysts have tended to discount claims of either
large gains or large losses from the operation of the trade agreements.(7)
Furthermore, notwithstanding increasing transnational economic integration,
national borders still matter a lot in determining trade flows.(8)
And, given the persistence of interprovincial barriers in the Canadian
case, there is still work to do to liberalize internal trade flows.
The ongoing political debate
over NAFTAs evolution and impacts is less on whether these are wealth-enhancing
in the aggregate than on whether benefits and costs have been fairly shared,
and whether the constraints put on government action are compatible with
democratically determined values such as environmental protection and
social health. For Canada, being able to preserve a distinctive cultural
identity is also fundamental. Although NAFTA is open to accession by other
countries, and Canada has favoured this for countries like Chile, there
are strong domestic misgivings in each country about further free-trade
expansion linked to social, environmental and other public-interest concerns.
U.S. initiative has been hampered by the inability to renew congressional
"fast-track" negotiating authority since 1994.
Compared to the highly institutionalized
trajectory of European integration, the NAFTA remains a very limited instrument
for addressing such issues. Yet as integration processes become broader
and deeper, the complications of the growing civil-society and values-based
dimensions of emerging trade and investment regimes are becoming apparent
for example, in the current public debate over the MAI, and as
Canada assumes the early chairmanship of hemispheric negotiations towards
an eventual Free Trade Area of the Americas (FTAA). In recent months,
moreover, Canadian Foreign Affairs Minister Lloyd Axworthy has been promoting
the concept of "building a North American Community" in response
to evolving regional economic integration and global agendas (see also
Note # 7).(9)
With respect to future relations
between the North American and European economic blocs, obviously there
are still many differences between the two, and the NAFTA countries continue
to pursue separate bilateral processes in their relations with the EU.
Canada is also looking to negotiate a bilateral agreement with the European
Free Trade Association (EFTA) countries.(10)
However the dynamics of regional integration may yet produce more expansive
opportunities for convergence. Several decades ago some had hoped that
a different NAFTA a North Atlantic Free Trade Area might
emerge. While that option never materialized, and while recent ideas proposing
a TAFTA (Transatlantic Free Trade Area) face many hurdles, few would contest
the desirability of deepening the transatlantic economic connection. The
question is: how to do this, given current NAFTA and EU realities?(11)
Canada is also on record
as favouring a movement towards a "community-to-community" transatlantic
economic arrangement that would be good for each bloc as well as consistent
with momentum for global trade liberalization (see Note #9).(12)
Even if present circumstances are not propitious to such a concept, it
merits serious consideration. As a Canadian ambassador with experience
on both sides of the Atlantic recently observed:
The North American marketplace
is working for Canada. But Canadas opportunities and engagements
are also global, and a rational case can be made that they still begin
in Europe
. In fact, strengthening connections between Europe and
North America may be emerging as tomorrows story, not yesterdays.(13)
APPENDIX
1
THE MAIN ELEMENTS OF THE
NAFTA
A. Tariffs
B. Rules
of Origin
-
To
qualify for preferential tariff treatment, goods must be wholly made
in North America or, if incorporating imported inputs, have undergone
sufficient transformation to qualify under a specific tariff classification.
Some items, such as automotive goods, textiles and electronic goods
must meet special North American content rules.
C. Investment
-
The
NAFTA employs the principles of national treatment and most-favoured
nation treatment to investments by other-party investors.
-
Investment
Canada review thresholds for investments by NAFTA investors are the
same as under the FTA.
-
A
separate settlement procedure is added for investment disputes.
D. Services
-
The
principles of national treatment and most-favoured nation treatment
are applied to cross-border trade in services.
-
Specifically
excluded from the services chapter are social services provided by
governments, basic telecommunications, most maritime and air services.
Source: Anthony Chapman,
North-American Free Trade Agreement: Rationale and Issues, Background
Paper 327E, Parliamentary Research Branch, Ottawa, January 1993.
E. Financial
Services
-
The
principles of national treatment, most-favoured nation treatment,
transparency and right of establishment, are established for trade
in financial services.
-
Sale
of financial services across borders is permitted.
-
Canadian
foreign ownership restrictions on federally regulated financial institutions
are removed from Mexican investors.
-
Canadian
and U.S. financial institutions will be permitted to establish in
Mexico subject to market share restrictions until the year 2000.
F. Government
Procurement
-
Procurements
by specified government departments and agencies of goods and services
over US$50,000, and construction services over US$6.5 million, are
opened up to competition from other NAFTA countries.
-
The
respective review thresholds for purchases by government-owned enterprises
are US$250,000 for goods and services and US$8 million for construction
services.
-
For
procurements covered by the FTA, the dollar thresholds will continue
to apply.
G. Land
Transportation
H. Telecommunications
-
The
NAFTA removes barriers to access for enhanced telecommunications services
(but not basic services) by applying the principles of transparency
and non-discrimination.
-
The
NAFTA limits the types of standards-related measures that can be imposed
on the attachment of telecommunications equipment to public networks.
I. Agriculture
-
Quotas
essential to the maintenance of Canada's supply management system
for dairy, poultry and eggs are retained.
-
Import
licences in sectors of Canada-Mexico trade will be replaced with tariffs
or tariff-rate quotas.
-
Canadian
import restrictions covering wheat, barley, beef and veal, and margarine
will be removed immediately.
J. Review
of Antidumping and Countervailing Duty Matters
-
The
NAFTA retains the FTA's dispute settlement provisions in antidumping
and countervailing duty matters involving binding decisions by panels.
-
A
special committee may be established upon request to determine whether
a country's law has interfered with the panel's decision-making.
K. Institutional Arrangement
and Dispute Settlement Procedures
-
The
Trade Commission, the NAFTA's central institution comprising international
trade ministers from each country, is to meet annually.
-
A
Secretariat will be established to serve the Commission as well as
other subsidiary bodies and dispute settlement panels.
-
Disputes
regarding the interpretation or application of the Agreement go first
to consultation, then to the Trade Commission, then to a dispute settlement
panel.
L. Automotive
Trade
-
Canada
and Mexico will eliminate mutual tariffs: on automobiles by 50% immediately
and the remainder over 10 years; on light trucks by 50% immediately
and the remainder over five years; on other vehicles over ten years.
-
Passenger
automobiles, light trucks and engines and transmissions for these
vehicles must eventually meet a 62.5% North American content level
based on the net cost formula; other vehicles must meet a 60% content
level.
M. Textiles
and Apparel
-
Most
textile or apparel products must be made from yarn that is North American-made;
Cotton and man-made fibre yarns must be made from fibres that are
made in North America.
-
Under
tariff-rate quotas (TRQs), yarns, fabric and apparel that do not meet
the rules of origin can still qualify for preferential tariff treatment
up to specified import levels.
N. Energy
and Basic Petrochemicals
-
The
FTA's proportional sharing requirement is retained on Canada-U.S.
trade but this provision does not apply to trade with Mexico.
-
Mexico
opens non-basic petrochemicals and electricity-generating facilities
to private investment; investment in Mexico's other energy and basic
petrochemicals industries remains reserved to the state.
O. Other
Measures
-
Disciplines
are imposed on the development, adoption and enforcement of sanitary
and phytosanitary measures.
-
Disciplines
are set out on the use of technical standards.
-
Rules
and procedures are established for taking "safeguard" actions
to provide temporary relief to domestic industries adversely affected
by import surges.
-
Disciplines
are established on anticompetitive government and private sector business
practices.
-
The
NAFTA requires each country to protect intellectual property rights.
-
Provision
is made for temporary entry of business persons.
-
As
established by the FTA, Canadian cultural industries remain exempt
but the U.S. also retains the right to take measures of equivalent
commercial effect.
-
Other
countries or groups of countries may be admitted into the Agreement
if the NAFTA countries agree.
-
Any
country may withdraw from the Agreement on six-months' notice.
Source:
Anthony Chapman, North-American Free Trade Agreement: Rationale and
Issues, Background Paper 327E, Parliamentary Research Branch, Ottawa,
January 1993.
APPENDIX
2
NAFTAS INTERGOVERNMENTAL
BODIES
FREE TRADE COMMISSION
(FTC)
NAFTA Coordinating Secretariat
FTC Secretariat
Committee on Trade in Goods
Working Group on Rules of
Origin
Committee on Trade in Worn
Clothing
Committee on Agricultural
Trade
-
Working Group on Agricultural
Grading and Marketing Standards
-
Working Group on Agricultural
Subsidies
-
Advisory Committee on
Private Agricultural Disputes
-
Working Group on Tariff
Rate Quota Administration
Committee on Sanitary and
Phytosanitary Standards
Technical Working Group
on Pesticides
Trilateral/Bilateral Working
Groups adopted from Canada-US FTA
-
Meat, Poultry and Egg
Inspection Working Group
-
Plant Health, Seeds
and Fertilizers Working Group
-
Animal Health Working
Group
-
Dairy, Fruit and Vegetable
Inspection
-
Veterinary Drugs and
Feeds
-
Food, Beverage, Colour
Additives and Unavoidable Contaminants
-
Packaging and Labelling
Working Group
-
Fish and Fisheries Products
Inspection
Committee on Standards-Related
Measures
Land Transportation Subcommittee
-
LTSS I Driver and Vehicle
Safety Compliance
-
LTSS II Vehicle Weight
and Dimension
-
LTSS III Road Signs
-
LTSS IV Rail Operations
-
LTSS V Committee on
Transportation of Dangerous Goods
-
Telecommunications Standards
Subcommittee
-
Automotive Standards
Council
-
Textile/Apparel Labelling
Subcommittee
Working Group on Government
Procurement
Committee on Small Business
Financial Services
Working Group on Trade and
Competition Policy
Working Group on Temporary
Entry
Advisory Committee on Private
Commercial Disputes
Working Group on Emergency
Action
Working Group on Subsidies
and Countervailing Duties
Working Group on Dumping
and Antidumping Duties
Working Group on Investment
and Services
COMMISSION FOR ENVIRONMENTAL
COOPERATION (CEC)
CEC Council
CEC Secretariat
Joint Public Advisory Committee
(JPAC)
National Advisory Committees
COMMISSION FOR LABOR
COOPERATION (CLC)
CLC Council
CLC Secretariat
National Administrative
Offices (NAOs)
National Advisory Committees
REVIEW PROCESSES
Long-term review process
Automotive
Long-term review process
GATT/WTO
NAFTA-INSPIRED INSTITUTIONS
Energy Efficiency Labelling
Group
Health Group
Transportation Consultative
Group
Border Environment Cooperation
Commission
North American Development
Bank
Source:
NAFTAs Institutions: The Environmental Potential and Performance
of the NAFTA Free Trade Commission and Related Bodies, Commission
for Environmental Cooperation, Montreal, 1997, Appendix A, p. 67-69.
NOTE
#2 THE NAFTA DISPUTE SETTLEMENT PROVISIONS:
STRUCTURES AND PERFORMANCE
How
The Dispute Resolution Institutions Work
NAFTA builds on and goes
beyond the innovative mechanisms that were established as a crucial part
of the Canada-U.S. FTA. A chief motivation for Canada in seeking bilateral
free trade had been to achieve some relief from rising U.S. protectionist
measures, mainly its trade-remedy laws which authorized the use of anti-dumping
(AD) or countervailing duties (CVD) to retaliate against imports from
Canada alleged by American competitors to be unfairly priced or subsidized.
The Canadian goal was, and still is, to replace these controversial and
costly remedies with a set of agreed North American rules. The U.S. has
always been very reluctant to make concessions in this area. As Gilbert
Gagné notes: "In view of divergences between Canadian and American
authorities, what was agreed was an interim mechanism, consisting
mainly of binational panels to review AD and CVD decisions as to whether
national trade remedy laws have been correctly applied. These provisions
were meant to be temporary in the FTA, awaiting a common regime covering
dumping and subsidies."(14)
The FTA provided for a five to seven-year period to negotiate such a regime.
Given U.S. resistance to backing away from its national laws, it is quite
possible that had NAFTA not come along, the FTAs provisional system
of binational review would not have survived beyond this period.
NAFTA, however,
permanently establishes the recourse to binational panels in its Chapter
19, among a number of institutional procedures for settling disputes involving
any of the three parties.(15)
There are also general provisions for dispute resolution set out in Chapter
20 of the agreement. If differences arise over inconsistencies with NAFTA
obligations that cannot be resolved through consultations in the trilateral
Free Trade Commission, NAFTA authorizes the establishment of five-member
arbitral panels, drawn from a roster of up to 30 accredited individuals
maintained by the Commission for this purpose and appointed by consensus
for renewable three-year terms. Some additional dispute settlement provisions
are contained in other NAFTA chapters, including the important investor-state
arbitration procedure for investment matters (Chapter 11),(16)
and modifications to the general procedures for financial services issues
(Chapter 14). The environmental and labour commissions also have their
own disputes procedures which will be dealt with in the notes for Workshop
II. The rest of this note will concentrate on the main area of commercial
disputes involving Canada in the decade since the FTA came into force:
namely, the AD and CVD cases mentioned above which are covered by complex
provisions set out in the FTA/NAFTAs Chapter 19.
Under this system each country
retains its own national trade-remedy laws, although there is an obligation
not to amend them in ways which would be inconsistent with the GATT/WTO
or the spirit of the NAFTA. That itself could be subject to a dispute
resolution proceeding, though there have been no cases to date. The core
element of Chapter 19 is that final AD and CVD determinations made by
national trade tribunals are subject to review by binational panels rather
than domestic judicial review. For this purpose, the FTA had provided
that a roster of 50 individuals with international trade law expertise
be established 25 named by Canada and 25 by the U.S.; in practice
the U.S. expanded its roster to 50 in view of the difficulty of choosing
candidates without conflicts of interest. Candidates are supposed to be
independent of government affiliation or instruction. Panels are composed
of five members two appointed by each party in consultation with
the other; the fifth by consensus but, failing that, by agreement among
the four appointees or, failing that, by lot from the overall roster.
The NAFTA version of Chapter 19 expands the roster to at least 75 names
and invokes a similar selection procedure but with several significant
differences. If the two parties involved in a dispute cannot agree on
a fifth panel member, then a country chosen by lot selects that member
from the roster; thus, it could arise that Mexico would choose the fifth
panellist in a case involving a Canada-U.S. dispute. The NAFTA roster
should include judges or former judges to the greatest extent possible,
a concession to the U.S. side which hoped this might have a restraining
effect on review decisions.
The NAFTA procedures
are more firmly entrenched and could be seen as technically more stringent
than those of the FTA. Yet it is very important to note that NAFTA panels,
like those of the FTA, are only empowered to determine whether the importing
countrys trade law has been correctly applied in the case in question.
Review is limited to "the administrative record and the standard
of review of the party whose remedy order is in question. Hence, panels
do not retry a case nor can they substitute their judgement for that of
state authorities. U.S. FTA implementing legislation makes clear that
panel decisions do not set binding precedents, i.e., they do not create
law."(17) An official
request for a NAFTA panel must be made within 30 days of a final AD or
CVD determination having been made by the relevant agency (e.g., the U.S.
Department of Commerce or International Trade Commission in cases brought
against Canadian imports). The panels final decision must then be
delivered within 315 days of the request date, and that decision is normally
binding on the parties, with retaliation authorized proportionate to the
case if there is a failure to comply. However, there are exceptional circumstances
in which a panel decision can be challenged: if it is alleged that a panel
decision and the integrity of the review process has been significantly
affected by a finding that a panel member has been guilty of gross misconduct
or serious conflict of interest, or that a panel has breached fundamental
rules of procedure or exceeded its authority. In such cases NAFTA provides
for the setting up of an "extraordinary challenge committee"
(ECC), composed of three judges,(18)
which then has 90 days within which to render its verdict to uphold, remand,
or nullify the panels decision.
The
Dispute Settlement Record from Canadas Perspective
As mentioned earlier, the
NAFTA does not provide for the replacement of trade-remedy laws by a substitute
system of common North American rules. There is only the declaration,
agreed to in late 1993 at Canadas insistence, that working groups
attempt to come up with trilateral codes on dumping and subsidies issues
by the end of 1995. Efforts to do this appear to have borne little fruit,
however.(19) If anything,
the atmosphere within the U.S. Congress is that the U.S. has already given
away too much in terms of its ability to deploy its trade arsenal against
alleged "unfair" practices by even its closest trading partners.
There is a perception that Canada, as a smaller party, has been favoured
by a binational review process which accords Canada equal rights and is
intended to be impartial, insulated from the political pressures that
may bear on domestic agencies administering trade law. At the same time,
the prevailing U.S. trade culture still aims to limit as much as possible
international review of its trade actions, whereas Canada has consistently
promoted stronger international rules.
It is true that
Canada has had considerable success in winning cases through the Chapter
19 panels. Reviewing the cumulative record of over 35 final panel rulings
from 1989 through 1997, Homer Moyer, a prominent U.S. trade lawyer who
has represented Canadian interests in Washington, found a "success
rate" of nearly 60% for Canada overall, as well as a slowdown in
the rate of new cases being initiated since 1994 (see Appendix 1).(20)
While the results were about even for antidumping cases, Canada has won
a clear majority of cases involving imposition of countervailing duties
or where determinations of "injury" to U.S. producers were involved.
Panels have found the most fault with U.S. agency decisions in CVD cases
alleging improper Canadian subsidies. For the most part, panel decisions
have not split along national lines and have, according to Moyer, introduced
constructive standards of legal review and produced high quality rulings,
even if this is reluctantly recognized by U.S. trade officials and politicians.
Canada has also come out ahead so far in the three instances where the
U.S. has invoked the extraordinary challenge procedure to attack panel
rulings favouring Canada. Two of those decisions were unanimous.
Unfortunately, the third
case involved the notoriously long-running and heavily politicized dispute
over Canadian softwood lumber exports, which had been a major issue in
dispute going back to the original bilateral FTA negotiations and is the
largest single trade-remedy case ever litigated in the U.S. Since that
time, Canada has won no fewer than five consecutive FTA/NAFTA panel rulings
in the repeated cases initiated by American producers on the lumber issue.
And that result has been upheld on appeal to an ECC; however, it was a
2-1 split decision in which the sole U.S. judge registered a strong dissent,
thereby lending ammunition to U.S. critics of the panel system. Other
legal challenges brought by U.S. lumber interests and other industry lobbies
and alleging that NAFTAs binational review violates the U.S. Constitution,
have not been successful either. That led by the American Coalition for
Competitive Trade was dismissed in November 1997, although a new and broader
anti-NAFTA constitutional suit was filed in a U.S. federal court in July
1998 by the Made in the USA Foundation and the United Steelworkers of
America. So far the fallout from these attacks seems to have been contained.
Of serious concern from a Canadian outlook, however, is that the campaign
of harassment against not only key Canadian export commodity sectors but
the principle of binational review itself, carries on notwithstanding
these favourable rulings. Indeed, as in the case of softwood lumber, the
result has been for Canada finally to agree to negotiate bilateral deals
outside the NAFTA rules, thereby in effect restraining exports in return
for temporary relief from new U.S. trade actions.
Another look
at the dispute settlement record reveals a more general pattern in which
the FTA/NAFTA mechanisms have failed to meet expectations that they would
effectively deter U.S. trade-remedy cases used to harass Canadian exports.
Surveying the 19 binational panel rulings involving U.S. AD and CVD determinations
in the 1989-93 period,(21)
Gagné acknowledges there have been some benefits. In certain cases, notably
with respect to Canadian pork exports, these rulings have forced cancellation
or reimbursement of U.S. duties; however, in other areas the impact has
been slight and duties have remained in place.(22)
More importantly, in the NAFTA period he sees the disputes mechanism as
having been undermined by the following serious underlying and interrelated
problems from a Canadian perspective:
-
The panels
limited scope for legal review does not create precedents and therefore
U.S. authorities can ignore previous panel rulings when similar cases
are repeatedly brought forward by persistent U.S. domestic trade lobbies
(as most notoriously in regard to Canadian softwood lumber exports).
-
The panel
process is supposed to lead to prompt binding decisions. But some
vexed cases (as above) have suffered from drawn out and costly delays,
and successive remands to U.S. agencies that have resisted complying
with the panel findings. Hence disputes drag on and losses mount,
even after panels have found in Canadas favour.
-
The pressures
from continued U.S. trade harassment notwithstanding Canadian panel
"wins" may prompt Canadian authorities to enter into ad
hoc political compromises to resolve disputes (just what NAFTA
was supposed to avoid; again lumber is the prime example, but the
U.S. has also demanded restraints on Canadian wheat exports).
-
Canada has
not used NAFTA provisions to challenge U.S. FTA/NAFTA and GATT/WTO
implementing legislation which has included unilateral U.S. positions
and interpretations intended to bolster the application of its trade
remedies, which can still be fully used against Canadian exports.
Moreover, the Canadian government is under pressure from some affected
industry sectors (notably steel) to ratchet up Canadas own trade
remedies in response; in effect, punitive tit-for-tat that could lead
to still more litigation on both sides rather than convergence around
common understandings of the rules.
-
The mandate
of the working group on trade remedies ended in 1995 without "even
a timid suggestion to eventually replace trade remedies" (which
had originally been a Canadian condition for concluding an FTA with
the U.S.).
-
The panels
have proved to be at best a very partial answer to U.S. protectionism
since "for many U.S. interests, the dispute mechanism is but
one stage of a much larger effort by which they hope to obtain government
intervention to assist them in the marketplace by securing relief
from import competition."
Gagnés
summary assessment is that: "Although more than 80 cases have come
before binational dispute panels, most involved limited issues with circumscribed
economic and political scope. If these have tended to be resolved successfully
following panel review, highly politicized cases involving large trade
volumes have highlighted the limitations of the binational mechanism."(23)
Canadian government assessments of the performance of NAFTAs dispute
mechanisms are more upbeat, often claiming that some 95% of the huge crossborder
trade flow is problem-free.(24)
Nevertheless, there is an acknowledgement that Canadian goals of secure
market access for our exports have yet to be met. As a recent publication
put it: "Despite the clear success of Chapter Nineteen under the
FTA and the NAFTA, Canada continues to believe that the application of
trade remedies has no place in a free-trade area. Accordingly, Canada
will continue to pursue the significant reform, if not elimination, of
trade remedies within North America."(25)
Canadian trade-law experts
accept that any strengthening of NAFTA rules will be much weaker than
the centralized regime achieved by Europes common market. Nonetheless,
many believe that the North American institutional framework for resolving
trade issues must be more firmly grounded. Lawrence Herman argues in regard
to the NAFTA panels that "some form of permanency would help to ensure
consistency in jurisprudence and, at the same time, create at least one
central body with an ongoing, vested interest in the NAFTA system at large,
as opposed to national secretariats each with a particular point of view
and ad hoc panels whose members meet, decide, and then disappear
back into their respective callings, never to meet again."(26)
William Graham, a former professor of international trade law who chairs
Canadas House of Commons Foreign Affairs and Trade Committee which
has conducted hearings into the operation of trade disputes mechanisms,
agrees that there should be a permanent NAFTA court.(27)
However, during recent meetings in the U.S. capital, the committee was
cautioned by Jeffrey Schott, of the Institute for International Economics,
that any reopening of NAFTA provisions would be a dangerous move in the
current U.S. political circumstances.
Given that Canada
can do little in the short run to rectify the serious weaknesses in the
NAFTA mechanisms, Robert Howse argues in a new study that Canada would
be better off taking more complex cases to the WTO panels system which
has been much enhanced over what existed in the GATT. Howse also favours
Canadas continued pursuit of an improved NAFTA process, including
the idea of a permanent tribunal, but he believes that the WTO now offers
an effective and available alternative for addressing some matters (e.g.,
softwood lumber) which have eluded satisfactory resolution through NAFTA.(28)
A further and more sweeping
consideration might be the lack of democratic public process associated
with the cases brought before dispute resolution mechanisms, in which
business "special interests" have tended to play a dominant
role behind the scenes. As Henry Jacek points out: "the public interest
has little to do with the dispute resolution mechanism. Consumer, labour
and environmental aspects of disputes are ignored. Although ostensibly
the disagreements are between national states, often governments are merely
surrogates or agents of organized business interests."(29)
Moreover, competing industry lobbies generate much of the information
used in arguing cases, review proceedings tend to be specialized and secretive
affairs, and "there are no clear common trading rules especially
when it comes to government subsidies and corporate differential pricing
policies."(30) In
these circumstances, determining the rights and wrongs of "fair trade"
may still in practice come down to who has the power to prevail in long
costly legal battles, rather than to what is the best outcome in terms
of societal welfare.
In short, while
the NAFTA dispute settlement provisions have been of considerable value
to Canadian exporters, they offer no guarantees of market access; nor
were they designed to deal with larger public interest issues arising
from the political and social dimensions of an increasingly integrated
North American economic space.
APPENDIX
![66e-note2ann1A.jpg (44089 bytes)](../images/prb989note2ann1a-e.jpg)
Chapter 19:
of the Canada-U.S. Free Trade Agreement and NAFTA
Miller and Chevalier, Chartered
providing for binational dispute settlement of Antidumping (AD)
March 31, 1998
and Countervailing Duty (CVD) Cases
ECCs: Extraordinary
Challenge Committee Procedures
![66e-note2ann1B.jpg (30485 bytes)](../images/prb989note2ann1b-e.jpg)
![66e-note2ann1C.jpg (34284 bytes)](../images/prb989note2ann1c-e.jpg)
PANEL
2
THE NAFTA COMMISSIONS:
LABOUR AND ENVIRONMENTAL ASPECTS OF NAFTA
NOTE
#3 MANDATE AND DEVELOPMENT OF NAFTAS SPECIALIZED COMMISSIONS
As stated in Note #1, and
listed in its Appendix 2, the NAFTA establishes a number of trilateral
implementing institutions, subsidiary bodies and working groups. The most
important of these are the Free Trade Commission, which meets at least
annually at the ministerial level, and its supporting secretariats. The
mandates and functions of these structures are as provided for in the
main text of the NAFTA as finalized and published in December 1992. This
text does not establish any specific structures for environmental and
labour standards. U.S. President Clinton was, however, committed to fulfilling
his 1992 election promise to negotiate further parallel or side accords
on the environment and on labour prior to Congressional ratification of
the treaty, an initiative supported by Canada. As a result, a North American
Agreement on Environmental Cooperation (NAAEC) was signed in August 1993,
and a North American Agreement on Labour Cooperation (NAALC) was signed
in September 1993. These NAFTA "side deals" entered into force
(with some important exceptions in the Canadian case, as will be explained
below) along with the main treaty on 1 January 1994. To implement
these agreements, two additional ministerial-level commissions were created
the Commission for Environmental Cooperation (CEC) which was located
in Montreal, and the Commission for Labour Cooperation (CLC) which was
located in Dallas.
The
NAAEC and the Commission for Environmental Cooperation (31)
While the NAFTA environmental
accord does not establish common environmental standards for NAFTA countries
to meet, it does contain strong imperative language regarding the obligation
of the NAFTA partners to enforce high standards of their own and to cooperate
on achieving environmental goals. Each Party "shall ensure that its
laws and regulations provide for high levels of environmental protection
and shall strive to continue to improve those laws and regulations."
A number of instruments and procedural measures are indicated to that
end, such as: education and further research, appropriate assessment and
enforcement techniques, and legal investigatory rights and powers. The
main trilateral institution established under the NAAEC is the Commission
for Environmental Cooperation (CEC) comprising a governing Council, a
supporting Secretariat, and a Joint Public Advisory Committee (JPAC).
As well, in 1995 the CEC created the North American Fund for Environmental
Cooperation (NAFEC) as a source of funding for community-based environmental
protection projects in the three countries.
The Council is a high-level
body made up of Cabinet members or their designees which meets at least
annually to consider and make recommendations to the NAFTA governments
on all environment-related policy matters covered by the NAFTA agreements.
The Montreal-based Secretariat performs a variety of functions. It prepares
an annual report to the Council and periodic assessments of the state
of the environment in each country. It may conduct reports on other requested
matters if at least two countries agree. The Secretariat is responsible
for carrying out the CECs cooperative work program. Initial areas
focused on establishing limits for specific air and marine pollutants,
conducting environmental assessments of projects with transboundary implications,
and developing reciprocal court access for damage or injury resulting
from transboundary pollution. More recent areas have included action plans
for regional management of hazardous chemicals and projects on climate
change. The Secretariat may also consider non-governmental (NGO) submissions
alleging that a Party is "failing to effectively enforce its environmental
law." This triggers a time-limited process whereby the Party in question
must respond and a two-thirds vote of the Council can authorize a "factual
record" to be produced and made public. Finally, the 15-member JPAC
consists of five citizens from each country and provides input to the
CEC on program and budget matters. A country may also set up its own national
public advisory committee and may empower this to choose its representatives
on the JPAC.
The NAAEC contains dispute
resolution procedures for cases where a country is accused by its NAFTA
partners of a "persistent failure" to enforce its environmental
laws in a sector affected by NAFTA trade. If an initial consultation period
and special meeting of the Council fails to make progress, a two-thirds
vote can authorize setting up a five-member arbitral panel (chosen from
among a roster of 45, 15 from each country; similar to the selection process
for panels under the general agreement). Countries have a chance to respond
to the initial findings of the panel before its final report, with recommendations
for remedial action if any, is delivered to the Council and made public.
If remedies are indicated, but no satisfactory action plan can be agreed
to by the parties, the panel may be reconvened to do the job. The panel
may also levy a "monetary enforcement assessment" (essentially
a fine payable to the Council) not to exceed US$20 million in NAFTAs
first year or, in subsequent years, 0.007% of the value of combined regional
trade. If there is still non-compliance, trade sanctions may be applied
equivalent to the amount of the fine. However, Canada was able to exempt
itself from this last provision, which accordingly applies only to the
U.S. and Mexico. Instead, if Canada were to fail to pay a fine imposed
by a panel, the CEC could go to the Canadian courts to obtain a legal
enforcement order.
There is another
very important sense in which the NAAEC allows for a "special regime"
for Canada, given its constitutional division of powers over environmental
matters.(32) In areas of
clear federal government jurisdiction there is no problem but in areas
involving provincial jurisdiction Canadian provinces must first agree
to be bound by the agreement in order for its provisions to affect them.
Moreover, the federal government cannot bring forward environmental cases
to NAFTA bodies on issues that lie within provincial jurisdiction unless
provinces accounting for at least 55% of Canadian GDP have so agreed and
at least 55% of production in the affected sector or industry takes place
in provinces bound by the NAAEC. Similarly, the U.S. and Mexico cannot
bring environmental cases against Canadian provinces that fall below those
55% thresholds. In 1994 Canadas federal and provincial governments
negotiated an "Intergovernmental Agreement" setting out joint
terms for compliance with the NAAEC. However, it was not until 1996 that
Alberta became the first province to sign that agreement, followed by
Quebec and Manitoba. Canadas largest province, Ontario, accounting
for over 40% of GDP and almost half of NAFTA trade, remains outside the
environmental accord. Hence its coverage is as yet only partially realized
with regard to Canada.
The
NAALC and the Commission for Labour Cooperation
The NAFTA labour side accord,
which is similar to the environmental accord, does not establish common
North America labour standards, but does contain imperative language obliging
the parties to respect workers rights and to provide for effective
enforcement of "high labour standards" through their own laws
in a number of ways. Unlike the environmental accord, however, the labour
accord has no obligation to consider non-governmental requests to investigate
alleged violations of labour laws. The NAALC states as its objectives
improving working conditions and living standards in each country and
promoting "to the maximum extent possible" a set of eleven labour
principles. Among the most important of these are: freedom of association;
the right to organize and to bargain collectively; the right to strike;
prohibition of forced and child labour; equal pay for men and women; occupational
health and safety and compensation for injuries and illnesses.
The main implementing NAALC
institutions are the Commission for Labour Cooperation (CLC) comprising
a high-level intergovernmental Council to consider major policy matters
and a supporting secretariat to perform administrative functions and carry
out an agreed work program. However, the CLC is a somewhat weaker body
than the CEC. There is no requirement for an annual report to the Council
from its secretariat, although it "shall periodically prepare background
reports setting out publicly available information supplied by each Party."
So far, studies have been released on North American labour markets, labour
law in the area of industrial relations, and the effects of sudden plant
closures. The Dallas-based secretariats staff is limited to 15 persons,
however, and there is no Joint Public Advisory Committee. There are only
National Administrative Offices (NAOs) located within the responsible
federal government agencies in the three NAFTA countries. In Canada, this
agency is the Ministry of Labour within the Department of Human Resources
Development. In addition, countries are free to set up their own national
advisory bodies.
Procedures for resolving
any differences on labour issues among the parties also diverge from those
in the environmental accord. For certain matters, in addition to consultations
via the NAOs and the CLC Council, the labour accord provides for the intervention
of three-member Evaluation Committees of Experts (ECEs), whose chair is
to be drawn from a roster developed in consultation with the International
Labour Organization (ILO), with other members drawn from a roster developed
by the parties. ECE findings are subject to comment from the parties before
final reports are submitted to the Council and published within specified
time frames. However, only ECE reports pertaining to three areas
child labour, occupational health and safety, and minimum-wage technical
standards can give rise to further dispute settlement actions on
the grounds of a "persistent pattern of failure" to enforce
laws in these areas. If consultations fail within the Council on such
a matter that is trade-related and "covered by mutually recognized
labour laws," the Council may proceed to an arbitral panel, following
procedures that mirror those of the NAAEC in regard to panel selection,
reporting deadlines, levying of fines and ultimate resort to trade sanctions
for non-compliance.
Again,
too, Canada has received special exemptions. Canada is not subject to
sanctions but agrees to make final panel rulings enforceable by a Canadian
court. And in any case of a general nature involving Canada, at least
35% of the affected workers must be in provinces that have agreed to be
bound by the NAALC. This provincial threshold rises to 55% for cases involving
a specific sector. As in the case of the NAAEC, only three provinces Quebec,
Alberta and Manitoba, accounting for some 40% of the Canadian labour force
have so far signed on to the Canadian Intergovernmental Agreement
governing provincial participation.
Assessments
of the Side Agreements and Implementing Commissions
Since 1994, NAFTAs
environmental and labour structures have received very mixed reviews from
both advocates and opponents of free-trade. They did break new ground
and help to legitimize environmental and labour-standards considerations
as part of trade and investment negotiations. Moreover, their reciprocal
application to Mexico was an important test, given that countrys
large and problematic disparities with its North American partners. At
the same time, business-oriented groups have tended either deliberately
to downplay these accords or to see them as unwarranted detractions from
an economic liberalization agenda.(33)
Indeed, some regard them as a dangerous precedent. Environmental and labour
groups can be equally dismissive of the value of the accords, but for
the opposite reasons --that they are too weak and conform too much to
paramount free-trade obligations. One of the main criticisms has been
that the NAFTA bodies cannot really do anything about the adequacy (or
rather inadequacy) of environmental and workers rights protection
in the three countries, and have quite limited means to bring about improved
enforcement of existing laws.
The NAFTA commissions
remain, after all, creatures of their governments. So, as Watson observed
early on: "It is easy to be cynical about the side agreements. Much
discretion is left to the three parties
[which] may be tempted to
scratch one anothers backs more often than not."(34)
However, it is also possible that this flexibility, rather than rigid
adherence to some minimum common standards, could be used positively by
the NAFTA governments. American law professor Jack Garvey argued that
the side agreements "specifically affirm the right of each party
to adopt higher standards than international levels. (
) Indeed,
the mandate is to assure the highest level of protection under each partys
law. (
) Until international standards can be negotiated, the side
agreements are the best mechanism for assuring that quality-of-life values
are brought into consideration alongside trade values."(35)
Given the stronger provisions in the environmental accord, some analysts
saw its institutions as having the best chance to play an activist role
in this regard.
Before turning to a more
specific examination of NAFTAs environmental and labour record,
it should also be added that the commissions are works in progress. A
provision of both the NAAEC and the NAALC is that there be an intergovernmental
review of their operation and effectiveness four years after their entry
into force. On the environmental side, the CECs governing Council
appointed an Independent Review Committee (IRC) in November 1997 to conduct
this assessment; its report was released following its submission to the
Council which last met in Mexico in June 1998. The report makes some ambitious
observations and recommendations (26 in all). To quote from its executive
summary:
The IRC believes
it is important to see the NAAEC as a complete agreement in its own
right, and not just a "side agreement" to a trade deal. In
the Committees view, the NAAEC is a critically important element
to achieve the goal of sustainable development in North America. Moreover,
the NAAEC is not just a trade and environment agreement in the legal
sense. Rather, the mandate of the CEC, as the Committee understands
it, is more broadly defined as the protection and enhancement of the
environment in North America in the context of changing economic patterns,
including the relevant trade and environment issues. The long term value
of the CEC will be measured by its fulfillment of this mandate.(36)
The four-year
review process on the labour side concluded in October 1998. Following
guidelines adopted by the CLC Council meeting held in Washington in September
1997, that process provided for comments from advisory bodies as well
as written public comments (which had to be received by the end of 1997),
and for an "independent Advisory Report to the Council" prepared
by a three-person Review Committee composed of non-governmental labour
experts chosen from each countrys national advisory committee or
alternates. That report was then to be made public as part of the Councils
final report on the review of the NAALC.(37)
Meeting for the second time in Canada on 8 October 1998, the Ministerial
Council released a series of conclusions suggesting modest improvements
responding to the results of the review, while acknowledging lacunae and
lack of consensus in some areas. A second comprehensive review is to be
conducted in the year 2002.(38)
NOTE
#4 THE NAFTA AND ENVIRONMENTAL ISSUES
NAFTA
As a "Green" Agreement? (39)
The final NAFTA text they
signed in December 1992 was hailed by the three governments as going further
than any previous free-trade agreement in incorporating environmental
provisions into its rules. Indeed the Canadian governments October
1992 official environmental review of the draft agreement reached in August
of that year exclaimed that: "The NAFTA establishes a new benchmark
for environmentally sensitive international trade and economic relations."
The main agreement and its preamble do contain a number of articles that
appear to be environmentally friendly:
-
commitments
to promote sustainable development and strengthen enforcement of environmental
protection measures
-
commitments
not to lower standards, to maintain high standards, and permission
to raise them above international norms
-
certain
international environmental agreements (e.g., on ozone, endangered
species, hazardous wastes) take precedence over NAFTA rules, subject
to a requirement to minimize any inconsistency
-
NAFTA disputes
processes that involve environmental measures can call upon scientific,
including environmental, experts; and the burden of proof is on the
complaining party(40)
Many
environmental groups were less than impressed, however, with the agreement
and the official reviews, doubting that the pro-environment commitments
would be binding, and suspecting that the overriding requirements for
laws and regulations to be the least trade-restrictive would trump environmental
protection provisions. The debate brought forward some of the main environmental
arguments against trade liberalization: "(1) trade promotes environmentally
unsound growth, (2) trade disciplines are a threat to domestic environmental
measures, (3) liberalized trade and investment are vehicles for downward
harmonization, (4) trade laws are obstacles to domestic trade measures
aimed at promoting the protection of the global environment, and (5) the
lack of openness and transparency with trade rules and institutions is
a critical problem."(41)
Serious concerns about environmental conditions in Mexico,
particularly in the border "maquiladora" export-processing zones,
and poor enforcement prospects in that country, added fuel to the debate.(42)
It
is clear that the NAFTA is a trade agreement with some environmental provisions
of arguable force and effect, and that those provisions "give precedence
over confrontation and punitive methods to procedures for information,
disclosure, discussion of joint problems, and cooperative programs."
Optimistic assessments have suggested that such an approach could increase
the influence of the environmental organizations and develop transnational
ties based on agreement that "the price of the partners products
traded in each others markets should absorb the cost of protecting
the environment."(43) Despite
continued business resistance to that concept, there are elements in NAFTA
that support an upward harmonization of environmental standards and can
also therefore benefit newer enterprises geared to taking advantage of
that trend.(44)
In Canada, for example, the federal government developed
an environmental industry strategy in the wake of NAFTA which has been
strongly supported by members of the Canadian Environmental Industries
Association, although there are now concerns that this program may no
longer be funded.(45)
With
regard to NAFTAs follow-on environmental side accord, the NAAEC,
the picture is also probably neither as green nor as depressingly grey
as has been claimed on opposing sides. Clearly there are weaknesses and
gaps. Much of the NAAEC consists of non-binding political commitments,
and there is no way to guarantee its effectiveness. The agreements
definition of environmental law does not cover the important area of management
or exploitation of natural resources, much of which falls under provincial
jurisdiction in Canada, where matters are further complicated since the
situation in regard to the constitutional foundations of environmental
law is unsatisfactory even as compared to Mexico.(46)
Moreover, in the Canadian case, NAAEC is still binding
on only three of the ten provinces. Certain environmental groups, notably
the Canadian Environmental Law Association, which were instrumental in
the opposition of Ontario, Canadas largest province, to the original
deals, have continued to judge their subsequent environmental worth harshly.(47)
At the same time, the NAAEC has been defended as representing
"a very significant advance, given that the parallel accord is the
first of its kind," while its drafters have been praised for having
" a good understanding of environmental issues and environmental
management."(48)
Overall,
Johnson and Beaulieu offer a nuanced provisional verdict that points the
way to more positive uses of NAFTAs potential in future
The
environmental content of NAFTA and the accompanying NAAEC is a complex
and difficult issue where many questions remain unresolved. (
)
One thing is certain. The environmental effects of trade-related growth,
particularly in the border area, have proved a lightning rod for NGO
criticism; had it not been for NAFTA it is doubtful that environmental
issues would have received the attention they have. Indeed, if NAFTA
had been defeated and not ratified, it seems clear that a rare, if not
unique opportunity for moving environmental cooperation forward would
have been lost. (
)
the five year history of NAFTA has changed the face of the debate, probably
for good. Most mainstream NGOs have a better sense of the imperative
for trade and growth. Numerous proponents of free trade accept the fact
that the social dimension of trade liberalization must be properly addressed,
inside or alongside trade agreements, to produce significant, sustainable
economic and social progress. In that respect, we seem to be moving
away from the zero-sum game debates of recent years between environmentalists
and trade specialists.(49)
The
Environmental Record of NAFTA Institutions
The
most comprehensive assessment of the environmental performance of the
NAFTA regime is an independent study initiated by the Commission for Environmental
Cooperation as part of its NAFTA Effects Project and released in November
1997. Surveying all aspects of the NAFTA structures from the Free Trade
Commission on down, it found a very mixed record and some crucial deficiencies.
The good news was that: "at a minimum virtually all of NAFTAs
economic institutions with environmental responsibilities or relevance
have begun to act on their mandates.
The proliferation of post-NAFTA
institutions both within and beyond the Free Trade Commission framework,
suggests that a dynamic process of expanding trilateralization is underway
and is likely to include an ever-greater range of functional fields
and environmental issues."(50)
But practical accomplishments seemed few.(51)
While looking for the positive, the study also highlighted disappointing
results
Some
of the NAFTA committees have attained concrete achievements that may
have far-reaching effects. In some important areas, however, progress
has been slower for several reasons, including institutional rivalries
or claims from particular societal interests. In a few areas, such as
automotive emissions standards, clear environmental responsibilities
appear not to have been met as NAFTAs drafters might have envisaged.
For some bodies, the direct environmental relevance of the work has
not been recognized. Moreover, in no cases have NAFTAs economic
bodies acted on the permissive environmental mandates assigned to them
by NAFTA, and in some areas their mandatory environmental responsibilities,
from a political and legal standpoint, remain unfulfilled.(52)
The
consultants study was especially disturbed by a continuing "unhealthy
separation of trade and environment concerns," manifested most strikingly
in "the absence of a regular dialogue between the Free Trade Commission
and the Commission for Environmental Cooperation, despite the fact that
cabinet-level representatives in both bodies have recognized the value
of such a dialogue." It is hardly surprising, then, that this report
concluded that "much remains to be done to ensure that NAFTAs
institutions fulfill the trade agreements seminal commitment to
"promote sustainable development" and meet its economic objectives
"in a manner consistent with environmental protection and conservation."(53)
The
CEC itself also has some large question marks hanging over it. The Commission
made headlines with its first annual Taking Stock report released
in July 1997, which criticized major Canadian firms and ranked Ontario
as the third-worst pollution jurisdiction in North America. However, the
Commission to that point had dealt with only a small number of cases under
its non-governmental complaints procedure, including three from Canadians,
none of which had been successful. For example, a complaint launched by
the Alberta environmental group Friends of the Oldman River was rejected
by the CEC in April 1997. As of September 1998, of 18 citizen submissions
filed with the Commission since 1994 under the NAAEC Article 14 process,
10 are currently pending: four involving Canada; five involving Mexico,
and one, the United States. The CEC Council has issued only one "factual
record" determination so far.
In
early 1998, as a result of controversy surrounding another environmental
case against Canada, which led to the dismissal of the senior U.S. official,
the Commission was rocked by the abrupt firing of its first executive
director, Mexican Victor Lichtinger, who ironically had been reappointed
to a three-year term just a few months earlier. Some drew the conclusion
that his aggressive style had become too embarrassing to governments.
As well, the methodology and content of the CECs second Taking
Stock report released in October 1998 has been dogged by criticism
from Canadian government sources.(54) Nonetheless,
the CECs ministerial Council meeting in Mexico in June 1998 appeared
to reaffirm confidence in its mandate, while reportedly clipping the secretariats
wings as well as capping its annual budget at US$ 9 million.(55)
As mentioned in Note #3, the June 1998 report of the Independent Review
Committee on the NAAEC had recommended an ambitious strengthening of the
CECs role. In short, there are strong conflicting pressures in play.
The
Controversy over NAFTAs Investment Provisions
If
the environmental commissions reputation hangs in the balance, an
even more potentially damaging controversy over NAFTAs environmental
reputation has surfaced as a result of several lawsuits against the Canadian
government by U.S. corporations utilizing the investor-state arbitration
procedures under NAFTAs Chapter 11. This sets down rules whereby
private firms can sue governments directly for alleged breaches of their
NAFTA obligations, and has been held out as a prototype for investor protection
under the proposed Multilateral Agreement on Investment (MAI). In particular,
the case involving Ethyl Corp., the sole producer of a manganese-based
gasoline additive ("MMT"), has grabbed attention. Given concerns
about health risks and other adverse effects of MMT, it is not
used in Europe and remains banned in parts of the U.S. a Canadian
ban on the importation and interprovincial trade of MMT took effect in
1997.
Lacking
conclusive scientific evidence against MMT, and perhaps mindful of the
legal battles over its use plaguing the U.S. Environmental Protection
Agency, Canada acted under its trade rather than environmental law authority,
in turn provoking both a domestic and a NAFTA challenge. Several provinces
challenged the interprovincial trade ban under a 1994 Agreement on Internal
Trade. An arbitral panel ruled in their favour in June 1998. More worrisome
in this context was that U.S.-based Ethyl Corp. had initiated a NAFTA
Chapter 11 case against Canada, suing for US$250 million in damages. According
to Gordon Ritchie, a prominent Canadian trade consultant who was a principal
negotiator of the Canada-U.S. FTA: "If this claim were to stand,
it would impose a major constraint on the sovereignty of a country in
pursuing environmental and other regulations."(56)
An important difference between the FTA and NAFTA is that under the former
only governments could authorize such arbitration panels.
As
the controversy heated up in the wake of the loss on the interprovincial
ban, the Canadian government suddenly announced a settlement with Ethyl
in late July, in effect conceding the case. The U.S. company agreed to
drop its action in return for Canadas agreement to repeal its cross-border
ban, to pay Ethyl US$13 million in damages, and to admit there is not
yet scientific proof of harmful effects from MMT.(57)
That decision has not only been widely condemned on environmental
and health grounds, but has also raised renewed fears that NAFTAs
investment dispute provisions may be dangerously flawed in several ways.
First, in the words of a leading trade law expert, they put governments
"at peril if they adopt measures having the effect of
expropriating foreign-owned assets, directly or indirectly." Second,
NAFTA "allows these disputes to be dealt with entirely behind closed
doors, merely if one of the parties requests it. This is what happened
in the MMT case
.at the end of the day, public confidence in the
system can only be safely assured through full disclosure and accessibility."(58)
The
controversy widened further in August 1998 when it was revealed that a
second U.S. company had served notice in July of its intent to use the
same NAFTA process to claim compensation for a 1995 Canadian ban on exports
of toxic PCBs to the U.S. Trade and environment lawyer Howard Mann, a
principal drafter of the June 1998 independent review committee report
on the NAAEC, has warned that we could be "seeing the tip of the
iceberg."(59)
These cases are heightening similar concerns which have
been expressed about how MAI provisions might be used secretively by private
interests to overturn government regulations designed to safeguard the
public. In September 1998, a coalition of environmental, labour and social
groups called upon the NAFTA Commission for Environmental Cooperation
to examine the issue of the potential risks posed to the environment by
cases under NAFTAs investor-state rules.(60)
NOTE
#5 NAFTA AND LABOUR ISSUES
The
NAFTA text itself is virtually silent on labour issues except for unenforceable
commitments in the preamble to "improve working conditions and living
standards" and to "protect, enhance and enforce basic workers
rights." While supporters of trade liberalization have contended
that the economic activity it is intended to stimulate should also raise
incomes overall, labour critics have argued that the deregulated competitive
forces unleashed by market liberalization act to undermine the bargaining
power of workers and may cause significant wage and/or job losses in sectors
whose competitive position declines as a result of free trade. The NAFTA
was even more controversial than the Canada-U.S. FTA in this regard, due
to the inclusion of Mexico, a still-developing country with much lower
wage rates, weakly enforced work standards, and few independent unions
within an authoritarian governance system. New fears were raised that
Canadian and U.S. workers would lose out if firms relocated production
to Mexico to take advantage of such conditions. Because the social costs
of such trade-related moves are not accounted for in consumer prices (which
may fall because of cheaper labour), this phenomenon has been referred
to as a form of "social dumping" and likened to the problem
of not accounting for environmental costs in economic transactions. In
the context of the NAFTA debate, labour groups argued that the trading
environment among the three countries would not be fair unless strong
labour standards could be enforced in each, and unless provision was made
for adjustment assistance to workers in sectors that might be injured
by changing competitive positions.(61)
Some went beyond that to propose that a European-style "social charter"
be incorporated into any NAFTA arrangement.(62)
This idea is explored further in Note #6 for Workshop III on NAFTAs
social and cultural dimensions.
The
Record of NAFTA Institutions
The
1993 side accord which established the North American Commission for Labour
Cooperation is certainly much less than what labour groups had pushed
for. As one study describes it, the NAALC is "essentially a non-invasive
way of promoting worker rights
at the same time, both broad
and relatively weak."(63)
As stated in Note #4, the agreement promotes observance of eleven labour
principles, which is a more extensive list than the half-dozen "core"
labour standards identified by the ILO and the OECD, and already incorporated,
albeit unilaterally, into some U.S. trade laws. The problem is not with
the principles, but rather the lack of enforceability. Of the eleven,
three key rights to freely associate and organize, bargain collectively,
and strike are subject to only the weakest procedures under the
NAALC.
Moreover,
in only three areas of standards can successful complaints lead to an
imposition of sanctions or fines in the case of Canada. (See Appendix
for the categories of NAFTA labour principles grouped according to the
limited extent of their enforceability under the side agreement.)
The
majority of the 17 submissions filed with the NAALC Commission as of October
1998 have alleged Mexicos failure to enforce its laws concerning
the right of workers to organize their own unions. These are therefore
subject only to consultative procedures among the three parties. In June
1998, one of these cases was brought for the first time by the Canadian
government on behalf of a coalition of labour groups.(64)
A second Canadian case, involving migrant workers, was initiated in October
1998. Most of the five submissions brought to date against the United
States have also involved alleged violations of the right to organize.
The results so far seem modest at best "despite the fact that
Mexico finally recognized an independent union as a bargaining entity
in April of 1997, not a single Mexican worker fired for union activity
has been rehired or compensated as a direct result of a NAALC submission.
Indirectly, however, publicity surrounding some of the NAALC cases prompted
reinstatement of several workers."(65)
There are also claims that Mexico now spends considerably more to enforce
labour laws and that its occupational health and safety record is improving.
One
of the sharpest critical assessments has been made by a former U.S. government
official who was assistant to the U.S. chief negotiator for the NAALC.
Stephen Herzenberg observes that the side deal has suffered from being
the product of a flawed compromise:
NAFTAs
neoliberal champions viewed the negotiation of NAALC as an irritant,
a source of delay, and, like virtually all labor market regulation from
their perspective, bad policy. Most trade unions and other NAFTA skeptics
still see the NAALC as a political fig leaf for a trade agreement too
flawed and reflective of corporate priorities to be worth swallowing
at any price. International and human rights groups are the organizations
most actively using NAALC instruments. While their efforts have been
invaluable, their moral advocacy for rights and standards does not fundamentally
challenge the economic case for deregulation.(66)
Herzenberg
adds that, while NAFTAs economic policies may be benefiting business,
from the labour perspective in Canada and the U.S. they have been a failure
because working people and the unemployed are perceived to have lost ground
gained. Reflecting that much of Canadian labour law falls under provincial
jurisdiction, there is also the Canadian exception to the NAALC which
puts threshold requirements for provincial coverage. In effect, unless
and until Ontario binds itself to the agreement, the provisions on disputes
have only a limited application to Canada and to creative uses by Canadian
labour advocates. Notwithstanding all of these weaknesses, Herzenberg
believes that more could be done to turn the NAALC into a "tool for
promoting the high road." More complaints could be brought forward
on labour standards issues which are subject to expert evaluation procedures
and arbitration panels. Trilateral cooperation could be increased and
the Commissions secretariat given more independent powers to investigate
and make recommendations. As well: "Full Canadian incorporation into
NAALC might accelerate the development of a tri-national critique of U.S.
labor law analogous to that now developing in Mexico. It would build international
pressure in favor of modernizing U.S. labor law to resurrect the right
to organize and enable U.S. workers to share equitably in and contribute
more towards prosperity."(67)
NAFTAs
Impact on Labour
Evaluating
the impact of NAFTA on labour has proved to be far more difficult and
politically controversial than simply claiming that job creation has resulted
from the undeniably large increases in trade and investment flows among
the three countries. Labour critics have discounted such claims and focused
instead on the loss side of the ledger. On either side of the debate,
it is questionable how much good or ill can be attributed to NAFTA, as
distinct from the effects of ongoing technological change, global competitiveness
pressures, corporate restructuring strategies, "downsizing,"
and all the other forces impinging on North American labour markets. Nonetheless,
organized labour in the U.S. has attacked NAFTA as part of the campaign
to deny the U.S. president "fast-track" negotiating authority
to expand trade liberalization agreements. That authority has not been
renewed by Congress since 1994.(68)
Whatever the claims of governments and pro-NAFTA economists, the agreement
is clearly not popular with many elements of the labour movement. In joining
the latest U.S. constitutional challenge to NAFTA, United Steelworkers
of America President George Becker declared bluntly that: "NAFTA
has been an unmitigated disaster for working people in Canada and Mexico,
as well as in the United States."(69)
At
the same time, there has been growing labour interest in utilizing the
mechanisms under the labour cooperation side accord, both to counteract
business pressures on workers, and to advocate that this embryonic linkage
of trade to labour standards be further developed, extended and strengthened.(70)
As mentioned above, in Canada a first NAALC case was launched earlier
this year. Canadian labour spokespersons have also used the Labour Cooperation
Commission to outline their views forcefully in a tri-national context.
The senior economist of the Canadian Labour Congress (CLC) summarized
that body's position on NAFTA impacts in a submission to the Commissions
first annual North American seminar on incomes and productivity
As
documented in the recent CLC report on NAFTA (Social Dimensions of
North American Economic Integration), the Canada-US Free Trade Agreement
and NAFTA have increased the pressures of international competition
on Canadian capital, and this has resulted in large job losses in the
highly exposed and integrated manufacturing sector, and a significant
restructuring of the operations which have remained. In the competitive
struggle for survival and growth, capital has striven to raise productivity
while minimizing wage costs. (
)
We
used to live in a world in which we had high productivity growth which
was shared by workers, primarily through wage bargaining in relatively
discrete national contexts. Today we live in a world in which international
competitiveness, high levels of unemployment and underemployment, and
attacks on unions and labour standards have tipped the scales sharply
in favour of capital. Balance needs to be restored, either through attenuation
of the forces of international competitiveness, or through concerted
international action to raise labour standards and the bargaining power
of workers.(71)
It
is probably fair to say that the jury is still out as to whether NAFTAs
modest labour provisions offer much hope in helping to achieve that objective.
APPENDIX
NAALCS LABOR
PRINCIPLES
GROUP AND
PRINCIPLES |
|
EXTENT
OF ENFORCEABILITY |
GROUP I
-
Freedom of association
and protection of the right to organize
-
The right to bargain
collectively; and
-
The right to strike.
|
|
Enforceable by discussion
of National
Administrative Offices, Secretariat, and
Ministerial Council
|
GROUP II
-
Prohibition of
forced labor;
-
Minimum employment
standards pertaining to overtime pay;
-
Elimination of
employment discrimination;
-
Equal pay for
women and men;
-
Compensation in
cases of occupational injuries and illnesses; and
-
Protection of
migrant workers.
|
|
Enforceable
by discussion as indicated
for Group I plus evaluation by an Evaluation
Committee of Experts. |
GROUP III
-
Labor protections
for children and young persons;
-
Minimum employment
standards pertaining to minimum wages; and
-
Prevention of
occupational injuries and illnesses.
|
|
Enforceable by discussion
as for Group I,
evaluation as for Group II, and sanctions
determined by an Arbitral Panel.
|
From: Mary Jane Bolle, NAFTA
Labor Side Agreement: Lessons for the Worker Rights and Fast-Track Debate,
Congressional Research Service Report for Congress, Washington, October
1997, Figure 1, p. 4.
PANEL
3
SOCIAL AND CULTURAL
ASPECTS OF NAFTA
NOTE
#6 NAFTA AND SOCIAL ISSUES
The NAFTA text does not
specifically address social policy considerations among the three countries.
It does affirm political commitments not to lower environmental, labour,
and health and safety standards, along with intentions to promote improvements
in living standards; however, each country reserves the right to pursue
its own policies with respect to health care, social services delivery,
and so on. Apart from the largely non-binding environmental and labour
cooperation side accords, there are no mechanisms within NAFTA for pursuing
social policy objectives on a North American scale. Nonetheless, NAFTAs
impact on the social sector has proved to be controversial for several
reasons both that it goes too far in extending the reach of market
forces, and not far enough in terms of encompassing social, including
human rights, norms.(72)
It can be argued that NAFTAs
"neoliberal" approach to economic development ignores many problematic
aspects of trade liberalization: widening gaps between rich and poor and
between more and less skilled workers; social strains aggravated by pressures
on governments to reduce social spending and regulation as part of free-market
reforms that mostly benefit investors and the better off. In Mexico, the
circumstances of socio-economic disparities and "structural adjustments"
have been seen as particularly acute.(73)
This has led to calls to reform NAFTA; even to give it an explicit supranational
social dimension. At the same time, it can also be argued that NAFTAs
market-oriented rules pose a risk to national and subnational social policy
sectors that should stay protected and off limits to foreign commercial
competition. As we will see, the adequacy of sovereign reservations in
this area remains an important matter of debate in Canada.
More generally, the NAFTA
can be seen as part of a trend towards what WTO president Renato Ruggiero
has called "deep integration," which has been advancing most
rapidly in some regional settings. Even at the global level, it is anticipated
that "the future challenges for the trading system are primarily
in the domain of domestic regulation rather than border measures."(74)
This in turn raises complicated socio-political questions of governance
and democracy. In an early Canadian critique of NAFTA, Ian Robinson argued
that, by reducing public-sector powers and increasing those of corporate
actors in an environment of intensified competition, NAFTA would be likely
to worsen social trends and reduce the quality of democracy. Making comparisons
with more socially conscious European processes of economic integration,
Robinson proposed that North American trade policies be tied to efforts
to ameliorate social conditions and strengthen democratic prospects, both
regionally and ultimately globally.(75)
While the NAFTA governments would contend that its critics fears
have not been borne out, NAFTA has clearly raised attention to the social
implications of the trade policy agenda.
From
"Social Dumping" to a "Social Charter"?
The argument that NAFTA
could exacerbate problems of "social dumping" is mainly predicated
on sharply different conditions of production and employment in Canada
and the U.S. as compared to Mexico. Social dumping occurs when exports
benefit from unfair pricing advantages as a result of their production
being located where standards and their enforcement are weakest; in effect,
when trade exploits poor social conditions and externalizes those social
costs.(76) A strong economic
as well as social case can be made against such dumping. As noted trade
economist Peter Morici explains:
Eliminating this practice
would raise living standards by eliminating negative externalities,
i.e., practices whose social costs are not reflected in the monetary
costs borne by firms. Much like the elimination of tariffs and quotas,
ending social dumping would encourage a more efficient allocation of
resources and patterns of specialization among and within the three
countries.(77)
Agreeing to correct social
dumping implies that the trading partners have also agreed on some shared
societal values notably in regard to acceptable environmental,
labour and social standards as part of maintaining a playing field
that is fair as well as free. Achieving that may entail a substantial
upward harmonization of social standards along with social transfers to
assist all parts of the trading area in meeting these standards. Morici
suggests this is a positive, albeit not an easy, option in the NAFTA context:
"A social framework that requires the enforcement of reasonable standards
throughout North America and that provides Mexico with the financial and
technical resources necessary to act would be much more productive than
trade sanctions. A free trade agreement could thus resolve the problem
of social dumping in a way that otherwise would not be possible."(78)
NAFTAs critics, associating
the agreement with deepening social inequalities and diminishing redistributive
transfers by governments,(79)
have remained very sceptical that its free-trade orientation could accommodate
the kind of framework referred to above. Instead, labour and social advocates
have tended to look to European community models for inspiration on incorporating
such elements as: freer movement of labour as well as capital; social
charters spelling out common social rights and obligations; the European
Union Maastricht treatys "social chapter" (to which Great
Britain is no longer a holdout); EU "structural funds" and other
European social investment vehicles. Of course the European experience
of market integration has its own critics who allege continuing social
and democratic deficits. A bigger problem in borrowing from Europe is
how to separate the social solidarity elements from the institutions of
political integration. Surely a "social NAFTA" would need to
have some common budgetary capacity and policymaking institutions;
yet it is difficult to see how that ceding of sovereignty to a supranational
level would be politically feasible in any of the three countries.
Undoubtedly, in dealing
with the social and political sides of economic integration, Europes
historical experience is both much greater than and much different from
that of North America.(80)
Some Canadian analysts point out that social-charter proposals in this
country have been linked as well to domestic constitutional debates in
which a primary aim of advocates has been to entrench rights to existing
programs (e.g., medicare), and social and labour protections within Canada
to preserve a Canadian "acquis" in the face of external
trade-related pressures; this is in contrast to an outward orientation
that sees the social aspect as facilitating transition towards a transnational
economic union. Gilbert Winham and Elizabeth De Boer argue that: "In
Europe, the Social Charter coincides with internationalism; in Canada,
a charter is associated with nationalism and protectionism."(81)
Canadian social-charter proponents might take issue with that, arguing
they are not against socially responsible forms of liberalized
international trade resulting from economic integration within and beyond
North America. Winham and De Boer do acknowledge the likelihood that social
dimensions will feature prominently in post-NAFTA rounds of negotiations,
observing that: "As regional trade blocs take in poorer and more
diverse partners, the question of standardization in health, safety, and
employment will keep resurfacing.
support by labor and other groups
will make this an issue to watch in hemispheric trade talks in the future."(82)
NAFTA
Impacts on Social Policies and Programs
NAFTA contains a broad provision
in Annex II whereby each country "reserves the right to adopt or
maintain any measure with respect to the provision of public law enforcement
and correctional services, and the following services to the extent that
they are social services established for a public purpose: income security
or insurance, social security or insurance, social welfare, public education,
public training, health, and child care." This general exclusion
from NAFTA free-trade rules covers future as well as current measures.
Although the NAFTA social exemption has yet to be tested by dispute settlement
panels, it is alleged to be weakened by certain deficiencies. Other aspects
of NAFTA have also given cause for concern. For example, in the agreements
first year it was reported that the U.S. tobacco company Philip Morris
was threatening to use the investor-state procedures of Chapter 11 to
sue the Canadian government for hundreds of millions of dollars for "expropriation"
of trademark if, as part of anti-smoking health measures, legislation
were passed imposing plain-packaging requirements on cigarette manufacturers.(83)
While such threats of legal action may not be well-founded enough to deter
governments, they create uncertainty and a "chill" effect.
The most important anxiety
to have arisen to date has been the safeguarding of provincial government
"non-conforming" measures in Canadas decentralized system
of public and mixed public/not-for-profit/private delivery of health and
social services. In addition to the Annex II general national reservation,
NAFTA provided a two-year period for provinces and U.S. states to reserve,
through a detailed enumeration and listing process under Annex I, any
of their existing measures that might conflict with NAFTA rules. As the
December 1995 deadline approached, concerns mounted about the adequacy
of the general reservation, given that the U.S. government was said to
be interpreting it very narrowly to cover only services directly delivered
by governments; such an interpretation would then not protect many Canadian
health and social services that are delivered "for a public purpose"
but use non-governmental providers.
Public sector unions and
health groups obtained legal opinions suggesting that the general exclusion
was vulnerable to such ambiguities and to being further undermined by
the effects of funding cuts and deregulation of services. The British
Columbia provincial government also expressed strong concerns. While the
federal and some provincial governments maintained that Canadas
medicare system was not at risk, the deadline for listing subnational
reservations was extended to April 1996. At that time an agreement was
also secured among the NAFTA partners to make all non-conforming provincial/state
measures in place as of 1 January 1994 indefinitely reserved from
challenge under NAFTA investment/national treatment rules.
Some critics were not fully
reassured, however. The 1996 agreement does not cover financial services
or future provincial initiatives in the health and social services area.
An associate of the Canadian Health Coalition argued that:
the struggle to
protect Canadas health care sector from NAFTA is far from over.
NAFTA is so vast and convoluted that few people, including many on government,
understand how to interpret its manifold clauses. (
)
NAFTA was not so much
designed to shield health care or other social services as to open up
the economy to multinational corporations. The health care sector is
not protected from intellectual property provisions of NAFTA, and consequently,
escalating drug costs are threatening to bankrupt provincial drug plans
and hospitals. Similarly, our public health insurance system was not
shielded in the financial service chapter of the trade agreement, and
many questions regarding its future remain unanswered by federal officials.(84)
Concerns of this sort have
resurfaced in the context of the MAI negotiations. In light of the NAFTA
experience, it has been argued that Canada must obtain a clear and unbound
reservation for public and social services in any international investment
agreement. The Canadian parliamentary committee which studied the 1997
draft MAI text concurred, recommending that: "in consultation with
subnational levels of government, Canada must achieve an unbound reservation
for health, education and social services."(85)
NOTE
#7 NAFTA AND CULTURAL ISSUES
Like its social dimensions,
NAFTAs treatment of cultural and educational matters has been defined
more in the negative i.e., what is or is not adequately protected
by being excluded than in terms of the agreements capacity
to promote shared objectives in these areas. Again this is in contrast
to European integration frameworks. Some argue that a purely economistic
view of the NAFTA relationship is mistaken; that in addition to its environmental
and labour attachments, the agreement could pave the way for intensified
trilateral cooperation in social, cultural and educational fields.(86)
Addressing the tenth annual conference of the North American Institute
(NAMI) in Santa Fe, New Mexico in August 1998, Canadian foreign affairs
minister Lloyd Axworthy indicated that it was timely to consider deepening
the overall relationship among the three NAFTA countries.(87)
Mr. Axworthy expanded on the challenge of "building a North American
Community" in a September speech in Chicago that deserves citing
at length:
If we can get North American
co-operation right, not only will our own countries benefit but we would
provide an important model of regional co-operation in a fluid and uncertain
world. This would be an alternative model to that presented by the European
Union, for example, in that it would be institutionally much lighter
and would draw together economies at different stages of development.
We have a long way to
go, however, before we achieve that level of finely tuned co-operation
[beyond just trade and economics]
We need to update our shared
instruments and institutions to deal with challenges across a broad
spectrum: everything from shared natural environment to movement of
goods and people, and to education and human resources.
We need
to look ahead and develop a vision of what we want a North American
community to be. And in doing so, we have to deal with the tensions
inherent in globalization. This means developing a sense of "North
Americanness," while at the same time preserving our separate national
identities.
For Canadians, culture
gives a sense of shared identity as citizens and represents a core component
of our collective vision as a nation. Americans and Mexicans also have
their own sense of what constitutes culture and cultural identity. The
challenge, then, is to develop a North American "footprint"
that treads lightly enough so that it does not crush the existing landscape
formed by our distinctive histories and cultures.(88)
However, the Canadian cultural
debate during the first decade of continental free trade has been primarily
galvanized, not by a sense of new opportunities, but by persistent fears
that Canadas distinctive cultural identity and values would surely
become even more vulnerable to "Americanizing" influences within
an increasingly integrated North American market. The debate has revolved
around the survival of Canadas cultural defences against U.S. domination;
hence the culture-trade linkage remains an anxious and vexing one.
The
"Cultural Exemption" within the FTA/NAFTA
The Canada-U.S. free-trade
negotiations of the mid-1980s took place in the context of several decades
of domestic regulatory and financial support policies designed to nurture
and protect Canadian "cultural industries" in the face of mainly
American competition, and to boost the amount of "Canadian content"
in important areas of cultural activity music, books and magazines,
films, broadcasting, etc. Preserving and promoting cultural expression
that was uniquely Canadian was associated politically with essential national
identity and unity objectives. At the same time, Canadians continued to
be willing consumers of large volumes of American cultural products; for
example, they purchased almost 80% of all U.S. magazines sold abroad.
As described by John Thompson, Canadas "quest for cultural
sovereignty" has evoked little understanding or sympathy from American
policymakers, who view that market position as passive and benign
simply supplying Canadian consumer demand and who have increasingly
objected to protectionist cultural policies that might in any way restrict
such lucrative markets for U.S. cultural exports.(89)
The result of these fundamentally
divergent attitudes of the two countries towards culture and trade resulted
in a somewhat ambiguous compromise in the FTA. The key provision seems
to exempt Canadian cultural policies from free-trade rules, except for
a few specific undertakings.(90)
However, the same provision affirms the right of the U.S. to retaliate
and seek appropriate compensation of "equivalent commercial
effect" to any loss claimed in regard to any such policies
deemed inconsistent with FTA rules.(91)
In effect, it was an agreement to disagree which left Canadian culture
officially outside the agreement but as exposed as ever to U.S trade actions.
The FTA provisions were essentially carried over as they were into the
NAFTA.(92) The cultural
exemption clause does not apply to U.S.-Mexico trade.
The problem is that the
FTA/NAFTA provisions entrenched rather than resolved Canada-U.S. differences.
Indeed, bilateral cultural trade disputes have multiplied and taken on
a high profile during the 1990s, with a number of measures to support
Canadian cultures share of the domestic market being targeted by
the U.S. as unfair barriers to trade and investment. The ambiguities within
the FTA/NAFTA exemption persist, and neither country has sought to apply
FTA/NAFTA dispute resolution procedures to cultural matters.(93) Moreover,
the current cultural battles, such as the case involving U.S. "split-run"
magazines, are being contested more in terms of global trading rules.(94)
Within the GATT/WTO commitments, the General Agreement on Trade in Services
(GATS) allows Canada to continue to exempt cultural industries. However,
other WTO rules, including some in areas of intellectual property, copyright,
and so-called trade-related investment measures (TRIMS) apply to Canadian
cultural industries in complex ways that are likely to be tested by new
challenges. For example, the U.S. has protested revisions to Canadian
copyright laws which it says deny royalties to American performers in
contravention of NAFTA and WTO rules.(95)
Protecting
and Projecting Culture beyond NAFTA
The FTA/NAFTA exemption
for culture has been questioned on a number of grounds. Cultural groups
especially argue that it has not provided effective insulation from powerful
U.S. commercial interests and threats of retaliation, which, they contend,
have influenced Canada to back away from more nationalistic policies in
areas such as book publishing and film distribution. With regard to films,
U.S. producers, notably the major Hollywood film studios, have also continued
to enjoy certain historic rights in the Canadian market; this gives them
a privileged position objected to by European competitors like Polygram,
and over which the European Commission has taken Canada to the WTO. From
a longer-term perspective, it has been argued that the NAFTA exemption
perpetuates an unsatisfactory status quo while failing to provide any
constructive framework for working out better international understandings
and disputes procedures that accept some national cultural policy objectives
as legitimate.
Keith Acheson and Christopher
Maule observe that:
Attempts to insulate the
cultural industries from the liberalizing commitments accepted in other
industries have not succeeded. The United States has successfully pursued
its cultural interests in disputes with Canada within existing international
agreements and through informal bilateral channels. The Canadian policy
of selective and discriminatory granting of access creates disparities
of treatment among American interests and between those American companies,
which have received access, and similar companies from other countries.
These disparities are a breeding ground for trade disputes. Similar
challenges will arise if a MAI is negotiated and culture is exempted
from the obligations of the agreement.(96)
In short, the lesson of
NAFTA in the cultural field is that exemptions leave many problems unresolved
and may prove to be inadequate or perverse defences against external challenges.
Being essentially reactive rather than forward-looking, they are not very
helpful when it comes to addressing issues such as the impact of new global
technologies (e.g., Internet or satellite-based) on culture, or in seeking
greater access for Canadian cultural goods and services in other countries.
Indeed exports of Canadian cultural products excluding film have doubled
since 1990, reaching $1.5 billion in 1997. Sustaining that positive direction
of expanding cultural trade requires an orderly and reciprocal rules-based
international framework.
Recognizing such challenges,
Canada hosted an International Meeting on Cultural Policy in June 1998
which included ministerial representation from 20 countries, with the
aim of forming an international network that will seek ways to preserve
and promote cultural diversity. Although the U.S. was not invited to that
meeting, Canadas other NAFTA partner, Mexico, is a member of a four-country
contact group (along with Canada, Sweden and Greece) and will host the
next meeting in 1999.(97)
Canadian cultural groups, while remaining deeply sceptical of the provisions
in current international trade and investment agreements (the GATT/WTO
and the proposed MAI, as well as the FTA/NAFTA), have also been exploring
constructive international alternatives. An important report released
in June 1998 suggests that, instead of relying on inadequate exemptions
in flawed commercial agreements, work should go forward towards establishing
a separate international agreement on culture that would advance the concept
of "global parallel rights" in the cultural area.(98)
Obviously these initiatives
face many hurdles and move very far beyond what the NAFTA provides for.
Nevertheless, even if NAFTA seems so far to have accentuated rather than
attenuated Canada-U.S. cultural disputes, perhaps, if Minister Axworthy
is right, it can evolve in the direction of a regional community arrangement
that will help to bridge such divergences and foster more cooperative
solutions.
DAY
TWO: CANADA AND THE EUROPEAN UNION:
TOWARDS A TRANSATLANTIC MARKETPLACE
(Briefing
Notes #8 and #9 by Peter Berg)
SESSION
1
HIGHLIGHTS OF CANADA-EUROPE TRADE AND ECONOMIC RELATIONS
DOCUMENTATION
-
Department
of Foreign Affairs Fact Sheet and Overview
of Canada-European Union and Economic Relations 1976-1997
-
Joint Political
Declaration on Canada EU Relations (December 1996)
and Prime Ministers Press Release on May 1998 Canada-EU Summit
-
Chapter
by David Long, "Canada-EU Relations
in the 1990s," in Canada among the Nations 1998
SESSION
2
SECTORAL ISSUES AND AREAS
FOR FUTURE BILATERAL AGREEMENT
NOTE
#8: AN OVERVIEW OF CANADAS CURRENT TRADE
IRRITANTS WITH THE EUROPEAN UNION
Introduction
"Canada-EU
trade irritants have come to preoccupy official relations between
the two sides. There is a prevalent attitude that the Canada-EU
relationship is mired in a variety of niggling disputes over minor
trade issues. In fact, an overemphasis on this aspect of the relationship
has led to considerable pessimism regarding future prospects for
Canada-EU relations."(99)
|
In 1997, two-way merchandise
trade between Canada and the European Union (EU) exceeded $40 billion,
a not insignificant achievement. Trade in services adds roughly another
third to the total. Given the scale of this economic relationship, one
should not be surprised that a number of bilateral irritants have arisen.
However, there is also no denying that Canada-EU trade relations have,
in recent years, been dominated by a long list of quantitatively minor,
albeit no doubt individually important, trade disputes, some of which
have remained unsolved over lengthy periods. It is generally recognized
that removing or reducing trade irritants can be a time-consuming process
that can distract government officials from the loftier pursuit of enhancing
the overall trade relationship; hence the number of disputes that have
dragged on is a continuing concern.
It is also worth mentioning
that disputes involving primarily Canada and a single member of the EU
can have broader repercussions for overall Canada-EU relations. It has
been said that there is an inherent "predicament for Canada in dealing
with a bloc of countries like the European Union, which operates on the
basis of solidarity. A dispute over a single issue affecting the interests
primarily of a single Member State, in this case Spain, automatically
affects negatively relations with the entire European Union
this
problem is likely to be compounded in the future as the EU takes in more
members."(100)
Of course no trading relationship,
much less a large and complex one, can ever be categorized as free of
conflict. It is also true that the trade irritants in question have been,
or are being, examined in an orderly manner, largely through World Trade
Organization (WTO) dispute resolution mechanisms. With the possible exception
of the battle over turbot stocks (resolved bilaterally by Canada and the
EU in April 1997) and the controversial use of leghold traps in catching
fur-bearing animals (settled through the signing in December 1997 of a
Canada-EU agreement on humane trapping), these disputes have not been
nearly as high-profile or as contentious as many of those involving our
neighbour to the South.
Most of the disputes in
question involve transactions in primary products, such as food and food
products, fish, forest products and asbestos. Unresolved priority issues,
grouped together by primary sector, are highlighted below.(101)
Agriculture
Canada continues to have
concerns with the protection afforded by the EUs Common Agricultural
Policy (CAP) to its agricultural producers. CAPs existence both
harms Canadas access to EU markets and affects its sales to third-country
markets in the sense that our exports must compete with those subsidized
by the EU. Particularly irksome have been recent increases in EU subsidies
on barley and oat exports in response to the decline in world grain prices.
It is hoped that the upcoming enlargement of the EU membership will precipitate
changes in CAPs current configuration and future subsidy policy.
Another bone of contention
is the EUs grain-import regime, which according to Canada
is not consistent with the EUs WTO commitments to refrain from imposing
a duty on cereal imports in situations in which the import price is greater
than the EU intervention price plus 55%. Canada maintains that the EUs
use of U.S. commodity market quotations as reference prices for the calculation
of duties instead of a duty calculation derived from "transaction
value" is harmful to the interests of Canadian exporters of premium-priced
products. Canada requested an WTO panel in July 1995, but this request
was removed when a refund agreement was concluded with the EU in December
of that year. Following additional controversy, another agreement was
reached during the 1997-98 crop year. A Canadian return to the WTO has
not been ruled out.
In recent years, in keeping
with its adoption of a precautionary approach to food safety, the EU has
accelerated its use of import-restricting measures designed to protect
the health and safety of its residents. Canada has argued that these measures
have not always been based on sound science. A prime example is the EUs
lack of approval of all of Canadas varieties of genetically modified
(GM) canola, which has prevented Canada from exporting canola into
the EU since 1997 and hampered two-way trade in oilseeds.
Similarly, exports of Canadian
tallow and its derivatives are being obstructed by of a ban on
certain high-risk materials which, it is thought, can eventually lead
to bovine spongioform encephalopathy (BSE), otherwise known as "mad
cow disease." Canada and the U.S. both claim that subjecting tallow
and its derivatives to heat during the manufacturing process removes the
BSE agent; this country has therefore sought to have tallow exports excluded
from the coverage of the ban.
Yet another instance where
the EU has erected barriers to trade in the name of health and safety
is the 1989 decision to ban the use of growth-promoting hormones in
livestock and imports of beef produced with such hormones. Canada,
along with the United States, has opposed the ban on the basis that it
cannot be supported on scientific grounds and therefore represents an
unjustified use of a non-tariff barrier to trade. After direct consultations
with the EU failed to resolve the dispute, Canada requested a WTO dispute
settlement panel in 1996. Reports issued by both the panel (August 1997)
and the WTO Appellate Body (January 1998), set up in response to an appeal
of the initial panels decision, were favourable to Canadian interests.
The EU now has until May 1999 to ensure that its measures on Canadian
beef imports conform to WTO rules.
Finally, access to EU markets
is also being restricted for quality-designated Canadian wines.
For example, the EU wants Canada to require its wine producers to refrain
from using certain EU-origin names, such as champagne, port and sherry.
The Canadian industry has been informed that it has until September 1998
to arrive at an agreement with the European Commission on such product
appellations as well as on Canadian wine-making standards, in order to
ensure that human health of EU residents is not threatened. Access to
the EU market will be blocked if no agreement is signed by then.
Fish
The resolution of Canadas
dispute with Spain (and by extension the EU) over access to the domestic
turbot fishery has been mentioned above. Technically, this dispute was
over access to the resource stock, not over trade. What continues to be
of concern on the trade side, however, is the continuation of elevated
EU tariffs on Canadian fish and seafood product exports. Tariff
rates for groundfish species of interest to Canada can be found in the
7.5-12% range, while tariffs for Canadian shrimp vary between 12 and 20%,
depending on the product. Sales of fish and seafood to EU customers have
slumped, from $446 million in 1988 to just over $300 million.
Mining
A large number of European
countries have now banned or significantly curtailed the use of chrysotile
asbestos, a product that has historically been imported into the EU
market. Perhaps the most notable was the 1997 ban imposed by France on
the manufacture, import and sale of asbestos and products containing asbestos.
The federal government, anxious to protect the fortunes of the Quebec-based
asbestos industry, is of the view that bans of this type cannot be supported
by scientific evidence, and that controlled use of the product does not
jeopardize individuals health. In May 1998, the government announced
it would initiate consultations at the WTO in order to settle Canadas
dispute with France over this matter.
Forest
Products
With the aim of preventing
the introduction into Europe of the pinewood nematode (PNW) insect,
the EU has since July 1993 insisted that all softwood lumber exports from
Canada, with the exception of cedar, be either kiln-dried or heat-treated.
The federal government has consistently opposed this regulatory requirement,
arguing that there is a minuscule risk of transmission of the insect to
European forests. In order to regain the access to the EU market that
it has effectively been denied, the government is currently mulling over
possible dispute resolution action at the WTO level.
SESSION
3
BEYOND NAFTA TO A CANADA-EUROPE
TRANSATLANTIC MARKETPLACE
NOTE
#9 STRENGTHENING THE TRANSATLANTIC TRADE RELATIONSHIP
Introduction
A strong case can be made
that Canadas trade relationship with the European Union (EU), the
worlds largest single market, is in need of a sharp boost. While
we now export over $23 billion in goods and services to the EU annually,
as a proportion of total merchandise exports the EU share has been on
the decline - from 12.6% to 5.1% over the period from 1980 to 1997.(102)
Moreover, Canadas exports to the 15 EU member countries have not
kept pace with Europes economic growth. In fact, at 0.6% of the
value of total EU imports, our exports to Europe are minuscule. Also of
concern is the fact that the merchandise trade deficit with the EU continues
to grow ($7.6 billion in 1997), with services trade also recording a deficit.
Granted, there are sound
explanations for the slippage in Canadas penetration of the European
market. The most important of these has been the increasing integration
of the North American economy which has resulted in a tremendous rise
in our exports to the United States.(103)
What is disconcerting, however, is that Canadas relative trade presence
in Europe is shrinking at the very moment that the EU market, as it undertakes
an aggressive expansion in membership and adopts a single currency, is
expected to grow.(104)
As was concluded at a recent Conference Board report on the Canada-EU
business relationship, Canada must seize the opportunities presented by
the expanding EU market to foster a more active transatlantic business
relationship.(105)
Forging
Bilateral Links
To
that end, the Canada-EU Action Plan, signed in December 1996, aimed
to resolve bilateral trade disputes and to examine ways to improve the
trade environment by removing existing tariffs(106)
and non-tariff barriers such as product standards and technical regulations,
making progress in the area of intellectual property rights, removing
discriminatory government procurement practices and freeing up services
trade. A key element of the Action Plan was the launching of a Joint Trade
Study designed to identify the barriers in specific sectors of the economy(107)
and to recommend ways of removing them, either bilaterally or multilaterally.
A draft of the study document was presented at the May 1998 Canada-EU
Summit.
The Conference Board report
also pointed to an urgent need for business on both sides of the Atlantic
to overcome what appears to be an "information deficit" about
each others markets. Without such information, business strategies
to capture market share will not be effective. The Joint Trade Study is
grappling with ways to address this all-important need for transatlantic
dialogue. Moreover, a first meeting of European and Canadian small businesses
took place in June 1998, and the federal government is also working with
the Canadian Advanced Technologies Association (CATA) to advance common
trade and investment interests among information, technology and medical
device companies.
In addition to its existing
ties to Canada, the EU has also attempted to improve its bilateral economic
relations with other Western Hemispheric partners, notably the United
States, Mexico, and MERCOSUR. In early 1998, following up the December
1995 U.S.-EU "New Transatlantic Agenda" Agreement, the EU Commission
stated its intention to explore a "New Transatlantic Marketplace"
(NTM) initiative with the U.S. This would encompass the creation of free
trade in commercial services by the year 2000; removal of tariffs on industrial
goods by 2010; the reduction of standards barriers to trade; and measures
in the areas of investment, intellectual property and procurement. However,
the proposal subsequently had difficulty gathering the necessary political
backing, either in the U.S. Congress or in the EU, where support for the
initial proposal could at best be described as fragile. A May 1998 EU-U.S.
Summit produced a more modest joint agreement on exploring a scaled-down
version the Transatlantic Economic Partnership (TEP). In September
1998, the EU Commission approved a draft "Action Plan" for the
TEP, expressing the hope that a joint plan could be agreed to at the next
U.S.-EU Summit in December 1998, and that Brussels and Washington will
"reach a closer understanding on the key issues that will be tackled
in any new multilateral trade negotiations starting in 2000."(108)
Notwithstanding the setbacks
to achieving a quick launch of negotiations on the European Commissions
NTM/TEP proposals, the Government of Canada has remained committed to
the notion of "trilateralizing" (Canada, EU, the U.S.) any bilateral
EU-U.S. trade initiatives. The federal view continues to be that a successful
implementation of a bilateral arrangement excluding Canada could adversely
affect Canadian interests. The government also considers a successful
outcome at the trilateral level could be a more useful catalyst for achieving
multilateral trade liberalization objectives than a dialogue dominated
by Brussels-Washington interests. Canada's interests towards participation
in these bilateral discussions continue to be thwarted, primarily because
of a lack of U.S. interest.
EU foreign ministers have
also approved a mandate for fast-track negotiations on a free-trade deal
with Mexico; these have received approval from both the European Parliament
and the Mexican Senate. The actual negotiations, which began in July 1998,
have focused on certain sectors, as opposed to the attainment of a comprehensive,
all-encompassing deal. From the Europeans perspective, the major
factor driving the push for a free-pact was the EUs loss of market
share in Mexico in the post-North American Free Trade Agreement (NAFTA)
environment.
Economic relations between
the EU and the South American MERCOSUR customs union (Argentina, Brazil,
Paraguay and Uruguay) could also see considerable strengthening. Talks
to adopt closer economic integration between the two regional blocs could
be launched at the first European-Latin American summit, scheduled for
Rio de Janeiro in 1999.(109)
Not to be outdone, Canada
has jumped on the bilateral bandwagon by launching its own formal negotiations
with the European Free Trade Association (EFTA). While not a large grouping
of European countries members include Switzerland, Norway, Iceland
and Liechtenstein a free-trade deal with EFTA could help Canada
reverse the sizeable deficit that has accumulated in its trade with the
above four countries and also give it a valuable foothold for wider trade
negotiations with Europe.
Transatlantic
Free Trade: A Realistic Option?
"
Europe
has three different paths: one with Canada; one with the United
States; and one with Mexico. And eventually, Canada believes that
there needs to be a convergence of those three paths because we
think that we should do the cross-Atlantic right or not do it at
all."
Hon. Sergio Marchi, Minister for International Trade, Testimony
to the House of Commons Standing Committee on Foreign Affairs and
International Trade, 28 May, 1998.
|
The bilateral discussions
that have taken place towards achieving freer trade between the EU and
Mexico, and more importantly between the EU and the United States, have
become a cause for some concern in Canada. Predicting the future course
of trade relations with the EU is, at the best of times, difficult. Whatever
the scenario that emerges, however, Canada will want to ensure that its
interests are not sidelined in any separate free-trade arrangements between
Europe and its NAFTA trading partners.
Useful as is much of the
work being performed under the auspices of the Canada-EU Action Plan and,
within it the joint trade study, it is difficult to imagine that it will
lead to significant trade liberalization. As one analyst of Canada-EU
relations has said, "
it is hard to see the Action Plan as the
most important feature of Canada-EU relations in the next several years.
The Action Plan, after all, for the most part formalizes and repackages
activities that were taking place already, such as co-operation on a variety
of issues in the WTO."(110)
While it is in Canadas
best interests to continue with its own Action Plan initiatives with the
EU, it is also prudent for it to continue with its parallel track of pursuing
its market access goals through other means. In this vein, Canada has
continued to lobby for an inter-regional approach to trade liberalization,
as opposed to a strictly bilateral one. It is of the view that a far more
effective approach would involve building on and extending NAFTA to include
the EU in a broadly based version of a Transatlantic Free Trade Agreement
(TAFTA).
In London in October 1997,
Prime Minister Chrétien renewed the Canadian proposal, first voiced in
1994, to set up a TAFTA between the NAFTA countries and the EU. The overall
objective was to achieve a removal of industrial tariffs within the designated
geographical area by a certain date. At every available opportunity since
then, the federal government has continued to state its case for a "community
to community" relationship, as opposed to three separate bilateral
processes.
Creating a TAFTA would provide
the global economy with at least two major benefits. At a time when many
Asian countries remain saddled with severe economic difficulties, and
the emerging markets of Eastern Europe and Latin America are feeling the
effects of "the Asian flu," a strengthening of transatlantic
economic ties between the two least disabled economic groupings could
serve as an important stimulus for increased economic activity.
Second, an inter-regional
link could, on the one hand, help stem any protectionist tendencies arising
out of todays economic malaise and, on the other, provide new momentum
for a new Millennium Round of trade negotiations at the World Trade Organization
(WTO) level. That organization continues to be the best forum for delivering
concrete, long-term results in the trade area. "As long as the goal
is not to replace the multilateral system still less to set up
a defensive bloc but to move beyond the commitments that we accepted
in the World Trade Organization, then a new free-trade partnership of
Europe and North America could set in motion a competitive dynamic to
reduce barriers worldwide. In short, transatlantic free trade could revitalize
the totality of the global system and begin the critical process
of bridging potentially exclusionary blocs."(111)
Is such a farsighted approach
to trade liberalization attainable? Thus far, the TAFTA concept does not
seem to have attracted widespread interest and support on either side
of the Atlantic. Obviously, there are still many differences between the
two economic blocs and, as has already been noted, the EU continues to
pursue separate bilateral processes in its relations with NAFTA members.
Of all the options, however, some broader form of strengthened transatlanticism,
moving towards a forward-looking free-trade arrangement, still seems to
offer the best opportunity for providing economic stimulus to a major
component of the world economy and kick-starting efforts to undertake
a new global round of trade liberalization.
APPENDIX
1
EXTRACTS FROM THE EUROPEAN
PARLIAMENT
RESOLUTION ON EUROPEAN UNION RELATIONS
WITH CANADA
![66e-note9ann1A.jpg (13572 bytes)](../images/prb989note9ann1a-e.jpg)
![66e-note9ann1B.jpg (65582 bytes)](../images/prb989note9ann1b-e.jpg)
![66e-note9ann1C.jpg (82044 bytes)](../images/prb989note9ann1c-e.jpg)
APPENDIX
2
MEMBERSHIPS IN MAJOR EUROPEAN
AND TRANSATLANTIC ORGANIZATIONS
![66e-note9ann2.jpg (71373 bytes)](../images/prb989note9ann2-e.jpg)
(1)
Stephen Clarkson, "Fearful Asymmetries: The Challenge of Analyzing
Continental Systems in a Globalizing World," Canadian-American
Public Policy, No. 35, September 1998. For other future scenarios,
see also Nicholas Gianaris, The North American Free Trade Agreement
and the European Union, Praeger, Westport Conn., 1998.
(2)
Beyond official documents produced by the NAFTA governments and intergovernmental
bodies, there is a burgeoning analytical literature on NAFTA and its various
aspects. From a Canadian perspective, a useful source that is generally
supportive of the agreement is Richard Lipsey et al., The
NAFTA: Whats In, Whats Out, Whats Next, C.D. Howe
Institute, Toronto, 1994. Subsequent private-sector studies have emphasized
overall positive effects on business and economic growth. An early collection
of critical views is Ricardo Grinspun and Maxwell Cameron, eds., The
Political Economy of North American Free Trade, McGill-Queens
University Press, Montreal and Kingston, 1993. A more recent compendium
of mixed reviews covering a wide range of NAFTA-related issues can be
found in Stephen Randall and Herman Konrad, eds., NAFTA in Transition,
University of Calgary Press, Calgary, 1995. NAFTA has become an entrenched
fact of North American economic life, but the NAFTA debate is far from
over.
(3)
For a more detailed list see Appendix 1.
(4)
Rules of origin explicitly discriminate against products from non-member
countries and therefore are among the more controversial aspects of regional
trade pacts. In the auto sector, the European Commission is also currently
pursuing a World Trade Organization challenge of Canadas duties
on imported European automobiles that do not qualify for North American
Auto Pact terms incorporated within the NAFTA which link duty-free access
to production performance requirements.
(5)
Randall, "Managing Trilateralism," in NAFTA in Transition,
p. 45.
(6)
NAFTAs Institutions: The Environmental Potential and Performance
of the NAFTA Free Trade Commission and Related Bodies, Commission
for Environmental Cooperation, Montreal, 1997, p. 11.
(7)
For Canada and the U.S., Gary Hufbauer and Jacqueline McFaden argue that:
"Our macroeconomic successes and failures have practically nothing
to do with the Canada/U.S. Free Trade Agreement (FTA) or NAFTA."
However, Mexico is a different case given a more turbulent transition
and the effects of the 1994-95 peso crisis. ("Judging NAFTA,"
Canada-United States Law Journal, Vol. 3:11, 1997, p. 11ff.)
(8)
In a recent study Canadian economist John Helliwell found that, before
the Canada-U.S. FTA, Canadian provinces were 20 times more likely to trade
with each other than with U.S. states. While this "border effect"
had dropped to a multiple of 12 by 1993, since NAFTA it has remained stable.
Helliwell argues that the focus on external linkages can be misleading
given the continued predominance of domestic trade and commercial relationships
contained within nations. This is the case even in regard to the most
highly integrated economic spaces like the European Union "single
market." J. Helliwell, How Much Do National Borders Matter?,
Brookings Institution Press, Washington D.C., August 1998. (See also,
"The Myth of the Global Economy," The Ottawa
Citizen, 14 September 1998.)
(9)
Cf. Notes for an Address by the Honourable Lloyd Axworthy Minister
of Foreign Affairs to the Canadian Institute of International Affairs
1998 Foreign Policy Conference, Department of Foreign Affairs and
International Trade, Ottawa, 16 October 1998.
(10)
Formal free-trade negotiations between Canada and EFTA (comprising Switzerland,
Liechtenstein, Norway, and Iceland; the last three of which are also members
of the European Economic Area) were launched in October 1998. EFTA is
a more important destination for Canadian exports than is Mexico, and
in terms of the value of export trade roughly comparable to the South
American grouping of Mercosur countries (Brazil, Argentina, Uruguay, and
Paraguay).
(11)
For the perspective of a prominent Canadian parliamentarian see William
C. Graham, "NAFTA vis à vis the EU Similarities and Differences
and Their Effects on Member Countries," Canada-United States Law
Journal, Vol. 23, 1997, p. 123-135. The challenge will be to
overcome divergent regional interests in order to forge common approaches.
For a range of North American and European views see Gavin Boyd, ed.,
The Struggle for World Markets: Competition and Cooperation between
NAFTA and the European Union, Cheltenham, UK, Edward Elgar,
1998, esp. John Dunning, "Re-energizing the Transatlantic Connection,"
and Stephen Blank and Anne Taillandier, "Atlantic Interdependencies
and Free Trade." (The book is the result of a November 1996 Conference
held at the University of Montreals École des Hautes Études Commerciales
and sponsored by the Centre for International Business Studies.)
(12)
Roy MacLaren, Canadian Trade Minister at the time of NAFTAs entry
into force (and currently Canadas candidate for next president of
the WTO), has been a strong advocate for this in Europe. Canadian Prime
Minister Chrétien proposed a transatlantic free-trade zone in addresses
to the French Senate in 1994 and in London in October 1997. Trade Minister
Sergio Marchi outlined the desirability of a joint NAFTA-EU approach in
an appearance before the House of Commons Standing Committee on Foreign
Affairs and International Trade in May 1998. So far, however, the idea
of a "TAFTA" seems to have attracted more interest and support
in the U.S. than in European circles. (See, for example, Thomas Duesterberg,
"Prospects for an EU-NAFTA Free Trade Agreement," The Washington
Quarterly, Spring 1995, p. 71-82.)
(13)
Jeremy Kinsman, "Transatlanticism: Is Europe Old Hat?",
Behind the Headlines, Vol. 55:3, 1998, p. 8 and 13.
(14)
Gilbert Gagné, "North American Free Trade, Canada, and US Trade Remedies:
An Assessment after Ten Years," Paper presented at the annual meeting
of the Canadian Political Science Association, Ottawa, June 1998, p.1.
(15)
The description here is very abbreviated. For further details, including
the relationship to GATT/WTO disputes procedures, see Lipsey et al.,
The NAFTA (1994), Chapter 8; also Lawrence Herman, "NAFTA
The Broad Strokes: A Canadian Lawyers Perspective,"
Canada-United States Law Journal, Vol. 23:85, 1997, p. 85-107.
In many areas, both NAFTA and WTO rules may apply, and recourse to either
forum would be possible (e.g., to challenge the U.S. Helms-Burton law
targeting foreign investments in Cuba). However, in a few instances, such
as challenges to domestic environmental regulations which restrict trade,
the party subject to the complaint may request that the dispute be resolved
solely through NAFTA mechanisms.
(16)
This has been invoked against Canada in cases involving contested environmental
questions and will therefore be dealt with in the briefing note on NAFTA
and environmental issues.
(17)
Gagné (1998), p. 6, emphasis added.
(18)
A roster of 15 five named by each country is maintained
for this purpose. In choosing an ECC, each party to the dispute selects
one member from that roster; the parties then decide by lot which of them
will select the third member.
(19)
The U.S. Statement of Administrative Action accompanying NAFTAs
entry into force did not even mention this declaration so it is doubtful
whether there was ever much U.S. commitment to the process. The report
from the single working group which was established, made public only
in 1997, did not progress beyond recommendations for minor technical improvements
to the existing review process.
(20)
Presentation to Canadas House of Commons Standing Committee on Foreign
Affairs and International Trade, Washington D.C., 31 March 1998.
(21)
During this period a total of 49 panels were requested, but some were
withdrawn or combined; of the 30 completed, 19 involved review of U.S.
agency decisions. (Gagné 1998, p. 9.)
(22)
See also Wiliam Davey, Pine & Swine. Canada-United States Trade
Dispute Settlement: The FTA Experience and NAFTA Prospects, Centre
for Trade Policy and Law, Ottawa, 1996.
(23)
Gagné (1998), p. 11 and passim.
(24)
For example, the Canadian Section of the NAFTA Secretariat, which is responsible
for administering Canadas participation in the dispute settlement
provisions, states: "With this volume of trade, disputes are inevitable.
It is estimated that about 5% of the $381 billion in Canadas bilateral
trade with the United States is currently under dispute" (1998-99
Estimates Part III Report on Plans and Priorities, p. 6).
(25)
Department of Foreign Affairs and International Trade, NAFTA: A Partnership
at Work, Ottawa, June 1997.
(26)
Lawrence Herman, "NAFTA The Broad Strokes," Canada-United
States Law Journal, 1997, p. 95.
(27)
William Graham, "NAFTA vis-à-vis the E.U." Canada-United
States Law Journal, 1997, p. 132ff.
(28)
Robert Howse, Settling Trade Remedy Disputes: When the WTO Forum Is
Better Than the NAFTA, C.D. Howe Institute Commentary, Toronto, July
1998.
(29)
Henry Jacek, "Business and Politics in the Formation and Implementation
of Trade Agreements Affecting North America: Dispute Settlement Mechanisms
and Labour/Environmental Standards," Paper presented to the Canadian
Political Science Association Annual Meeting, Ottawa, June 1998, p. 9.
(30)
Ibid.
(31)
This is a very summary description of a quite complex agreement. For a
more detailed early review, see William Watson, The NAFTA Papers: Environmental
and Labor Standards in the NAFTA, C.D. Howe Institute Commentary No.
57, February 1994. The most comprehensive account, which contains the
official texts and related intergovernmental agreements, is Pierre Marc
Johnson and André Beaulieu, The Environment and NAFTA: Understanding
and Implementing the New Continental Law, Island Press, Washington
D.C., 1996. There are also much updated information and trilingual documentation
available through the Commissions Website at http://www.cec.org.
(32)
See Johnson and Beaulieu (1996), chapter 11.
(33)
As Jacek observes:
The
business proponents of free trade agreements view these as merely commercial
agreements. Their view is that governments should not look at the components
or input factors of the price, such as labour costs or environmental
damage. The notion of a level playing field across all domestic jurisdictions
on these issues is clearly rejected. ("Business and Politics in
the Formation and Implementation of Trade Agreements affecting North
America" (1998), p. 4.)
(34)
Watson (1994), p. 17.
(35)
Jack Garvey, "Current Development: Trade Law and Quality of Life
Dispute Resolution under the NAFTA Side Accords on Labor and the
Environment," The American Journal of International Law, April
1995.
(36)
FourYear Review of the North American Agreement on Environmental
Cooperation: Report of the Independent Review Committee, Commission
for Environmental Cooperation, Montreal, June 1998, internet copy, p.
3.
(37)
"North American Labor Ministers Meet to Discuss Progress on NAFTA
Labor Commission," Communiqué of 18 September 1997, Commission for
Labour Cooperation, Dallas (internet copy available at http://www.naalc.org).
(38)
Cf. "Ministers Review NAFTAs Labor Agreement," Press release
and attachments, Commission for Labour Cooperation, 8 October 1998.
(39)
For a far-reaching assessment see John Audley, Green Politics and Global
Trade: NAFTA and the Future of Environmental Politics, Georgetown
University Press, Washington D.C., 1997.
(40)
However, as compared to European Community Law: "The NAFTA process
leaves much less scope for arguing competing trade and environmental values
before dispute-settlement panels. It is important to bear this in mind
when seeking to determine the extent and manner in which experts could
be used by NAFTA dispute-settlement panels." (Dispute Avoidance:
Weighing the Values of Trade and the Environment under the NAFTA and the
NAAEC, Montreal, Environment and Trade Series No. 3, Commission
for Environmental Cooperation, 1996, p. 21.)
(41)
Johnson and Beaulieu, The Environment and NAFTA (1996), p. 245-6.
(42)
For succinct reviews of the debate at the time see the following Parliamentary
Research Branch publications: Anthony Chapman, The North American Free
Trade Agreement: Rationale and Issues, BP-327E,
January 1993; William Murray, NAFTA and the Environment, MR-116E,
December 1993.
(43)
Annette Baker Fox, "Environment and Trade: The NAFTA Case,"
Political Science Quarterly, Spring 1995, p. 68.
(44)
See Johnson and Beaulieu (1996). Because NAFTA calls for higher standards
without relaxation, as Jacek puts it: "Business that conforms to
the highest national standard now has a NAFTA trade advantage" (1998,
p. 7).
(45)
"Cabinet Drops Clean, Green Strategy: Environmental Industries Mourn
Loss of Valuable Program," The Ottawa Citizen,
17 August 1998, p. A3.
(46)
For a critical review see Bradly Condon, "The Impact of the NAFTA,
the NAAEC, and Constitutional Law on Environmental Policy in Canada and
Mexico," in Randall and Konrad, NAFTA in Transition (1995),
p. 281-94.
(47)
See Donald Abelson, "Environmental Lobbying and Political Posturing:
the Role of Environmental Groups in Ontarios Debate over NAFTA,"
Canadian Public Administration, Vol. 38:3, Fall 1995, p. 352-81.
According to CELA executive director Michelle Swenarchuk:
Several U.S.
NAFTA panels have already ruled they cant do anything about loss
of laws. They have been powerless to stop states from lowering forestry
standards. If governments want to wipe the slate clean as far as protection
of the environment is concerned, there is nothing the NAFTA side deal
could do about it. (Quoted in the Winnipeg Free Press, 24 January
1997, p. A12)
(48)
Dixon Thompson, "The NAFTA Parallel Accord on the Environment,"
in Randall and Konrad, NAFTA in Transition, p. 325-26.
(49)
Johnson and Beaulieu (1996), p. 241-47.
(50)
NAFTAs Institutions: The Environmental Potential and Performance
of the NAFTA Free Trade Commission and Related Bodies, p. 17-18.
(51)
One exception cited approvingly was the Land Transportation Standards
Subcommittee Working Group on the Transportation of Dangerous Goods which
has produced an Emergency Response Guidebook and assisted Mexico
in upgrading its regulations.
(52)
NAFTAs Institutions, p. 16.
(53)
Ibid., p. 18-19.
(54)
"Major Canadian Companies on List of North Americas Worst Polluters,"
The Globe and Mail (Toronto), 3 March 1998, p. A3. That report,
when finally released on 7 October 1998, found some encouraging signs
of a downward trend in North American pollutant emissions. See also "Canadian
Factories Fingered in NAFTA Pollution Study," The Globe and Mail
(Toronto), 7 October, 1998.
(55)
"NAFTA Watchdog Leashed," The Globe and Mail (Toronto),
2 July 1998, p. B6.
(56)
Quoted in "Feds Fear Loss on MMT," The Globe and Mail,
(Toronto), 10 July 1998, p. B7.
(57)
"Gas War: the Fall and Rise of MMT," The Globe and Mail,
(Toronto), 24 July 1998.
(58)
Lawrence Herman, "MMT Case set Far-Reaching Precedent: Expropriation
Takes on New Meaning," The Financial Post, Toronto, 28 July
1998.
(59)
Quoted in "U.S. Firm Hits Ottawa with NAFTA Lawsuit," The
Globe and Mail (Toronto), 21 August 1998. See also "NAFTA
Process Unacceptable," The Globe and Mail (Toronto),
25 August 1998.
(60)
"NAFTA Lawsuits Cloud MAI Discussions," The Globe and Mail
(Toronto), 24 August 1998; "Groups Ask for NAFTA Challenge,"
The Globe and Mail (Toronto), 18 September 1998.
(61)
The U.S. implementing legislation for NAFTA did establish a transitional
adjustment assistance program for affected U.S. workers. There was no
similar special program in Canada. Any effects felt were likely to be
much greater in the U.S., where the debate was accordingly more intense,
given the much higher volume of U.S.-Mexico trade and the shared border.
(62)
See, for example, the chief economist of the Canadian Labour Congress,
Andrew Jackson, "A Social Charter and the NAFTA: A Labour Perspective,"
in William Watson, ed., North American Free Trade Area, Policy
Forum Series No. 24, John Deutsch Institute for the Study of Economic
Policy, Kingston, Ontario, October 1991, p. 77-93.
(63)
Mary Jane Bolle, NAFTA Labor Side Agreement: Lessons for the Worker
Rights and Fast-Track Debate, Congressional Research Service Report
for Congress, Washington, October 1997, p. 3.
(64)
The case involves the Mexican operations of U.S.-based automotive manufacturer
Echlin Inc. which also has plants in Canada. ("Labour Groups File
First NAFTA Complaint" and "Ottawa Approves Use of NAFTA Side
Deal," The Ottawa Citizen, 7 April 1998 and 6 June 1998.)
(65)
Bolle, NAFTA Labor Side Agreement (1997), p. 12.
(66)
Stephen Herzenberg, Calling Maggies Bluff: The NAFTA Labor Agreement
and the Development of an Alternative to Neoliberalism, Canadian American
Public Policy, Canadian-American Centre, University of Maine, No. 28,
December 1996, p. 3.
(67)
Ibid., p. 26.
(68)
On the contested linkage of NAFTA labour issues to the "fast-track"
debate see Bolle (1997), p. 13ff. See also Steve Charnovitz, "Labor
and Environmental Issues," in Jeffrey Schott, ed. Restarting Fast
Track, Special Report No. 11, Institute for International Economics,
Washington, April 1998.
(69)
Quoted in "Trade Pact Pits Worker against Worker," Kitchener-Waterloo
Record, 11 August 1998, p. A9.
(70)
Cf. Henry Jacek, "Business and Politics in the Formation and Implementation
of Trade Agreements Affecting North America: Dispute Settlement Mechanisms
and Labour/Environmental Standards," p. 4-6.
(71)
Andrew Jackson, "A Note on Productivity, Wages, and Profits in Canada
in Relation to NAFTA," Submission to the Commission for Labour Cooperation
North American Seminar on Incomes and Productivity, Dallas, February 1997,
p. 2-6.
(72)
In regard to the treatment of human rights concerns, some commentators
have looked to Europe as an exemplary alternative. In contrast to the
Americas, European integration processes are viewed as having successfully
linked regional economic integration with a supranational institutionalization
of human rights and legal norms. (Cf. James Smith, "NAFTA and Human
Rights: A Necessary Linkage," University of California Davis Law
Review, Summer 1994.) In Canada, the argument for a NAFTA-human rights
linkage has been put forward by the International Centre for Human Rights
and Democratic Development and by non-governmental coalitions such as
Common Frontiers. It also appears that the European Commission will raise
human rights as an issue in its bilateral trade talks with Mexico that
began in the summer of 1998.
(73)
See, for example, Ann Weston, The NAFTA Papers: Implications for Canada,
Mexico and Developing Countries, The North-South Institute, Ottawa,
1994; Diana Alarcon Gonzalez, "Trade Liberalization, Income Distribution,
and Poverty in Mexico: An Empirical Review of Recent Trends," in
Stephen Randall and Herman Konrad, NAFTA in Transition (1995).
(74)
Robert Wolfe and John Curtis, "Providing Leadership for the Trade
Regime," in Fen Osler Hampson and Maureen Appel Molot, eds., Canada
Among Nations 1998: Leadership and Dialogue, Oxford University Press,
Toronto, 1998 p. 121.
(75)
Ian Robinson, "The NAFTA, Democracy and Continental Economic Integration:
Trade Policy As If Democracy Mattered," in Susan Phillips, ed., How
Ottawa Spends 1993-1994: A More Democratic Canada?, Carleton University
Press, Ottawa, 1993, p. 333-80. Other versions of this essay were
also published by the Canadian Centre for Policy Alternatives.
(76)
The fact that Mexico has much lower wage rates does not in itself constitute
social dumping, as that situation may be commensurate with a lower productivity
and cost structure that affords Mexico a legitimate area of comparative
advantage. Dumping only results when in import-competing industries the
price of labour or other factor-input costs is deliberately kept low or
depressed, and there is a failure to maintain and enforce acceptable production
and workplace standards, thereby causing material injury to foreign competitors.
(77)
Peter Morici, "Implications of a Social Charter for the North American
Free Trade Agreement," in The Social Charter Implications of the
NAFTA, Canada-U.S. Outlook, National Planning Association, Washington,
1997, p. 8.
(78)
Ibid., p. 10.
(79)
See, for example, Charles Reasons, "NAFTA and Inequality: A Canadian
Perspective," Constitutional Forum, Spring and Summer 1994,
p. 72-77.
(80)
A useful comparative source is Dorval Brunelle and Christian Deblock,
eds., LAmérique du Nord et lEurope communitaire: Intégration
économique, intégration sociale?, Presses de lUniversité du
Québec, Sainte-Foy, 1994.
(81)
Elizabeth C. De Boer and Gilbert Winham, "Trade Negotiations and
Social Charters: The Case of the North American Free Trade Agreement,"
in The Social Charter Implications of the NAFTA, p. 30.
(82)
Ibid., p. 33. Such talks towards the eventual creation of a hemisphere-wide
free-trade area were launched at a second Americas summit held in Chile
in April 1998, and are proceeding under Canadian chairmanship for the
first 18 months of negotiations. While none of the nine negotiating groups
deals specifically with environmental, labour and social standards, Canada
has pushed hard to incorporate additional consultative processes involving
civil-society participation and concerns around these issues.
(83)
See David Schneiderman, "Canadian Constitutionalism and Sovereignty
after NAFTA," Constitutional Forum, Spring-Summer 1994, p.
97.
(84)
Colleen Fuller, "Doctoring to NAFTA," Canadian Forum,
June 1996, p. 18.
(85)
Canada and the Multilateral Agreement on Investment, Report of the
House of Commons Standing Committee on Foreign Affairs and International
Trade, Sub-Committee on International Trade, Trade Disputes and Investment,
Ottawa, December 1997, p. 37. An "unbound" reservation allows
a country to maintain a non-conforming measure and to alter it in the
future in any way. The Canadian government accepted the thrust of this
recommendation in its April 1998 response to the report.
(86)
See, for example, Philip Altbach, "NAFTA and Higher Education, the
Cultural and Educational Dimensions of Trade," Change, July/August
1994; Stephen Randall and Herman Konrad, NAFTA in Transition (1995),
"Introduction" and Part V "Public Policy and Culture."
(87)
At this meeting Mr. Axworthy announced a Canadian contribution to the
funding of the Alliance for Higher Education and Enterprise in North America.
(88)
Notes for an Address by the Hon. Lloyd Axworthy to a Meeting of the Mid-America
Committee: "Global Action, Continental Community: Human Security
in Canadian Foreign Policy," Chicago, 9 September 1998,
Department of Foreign Affairs and International Trade, Ottawa, p. 4-5
(Internet copy at http://www.dfait-maeci.gc.ca).
(89)
See John Herd Thompson, "Canadas Quest for Cultural Sovereignty,"
in Randall and Konrad, NAFTA in Transition, p. 393-410.
(90)
Article 2005, paragraph 1 of the FTA states that: "cultural industries
are exempt from the provisions of this agreement." The specific undertakings
included removal of tariffs on certain products such as sound recordings
and payment of royalties by Canadian cable television companies to American
broadcasters for the retransmission of their signals on Canadian systems.
(91)
Paragraph 2 of Article 2005 states that: "notwithstanding any other
provision of the agreement, a Party may takes measures of equivalent commercial
effect in response to actions that would have been inconsistent with this
agreement but for paragraph 1."
(92)
The only addition in the Canadian implementing legislation was to include
rental rights for copyrighted sound recordings and computer programs as
covered by NAFTA commitments to enforce intellectual property rights.
(93)
Cf. Ronald Atkey, "Canadian Cultural Industries Exemption from NAFTA
Its Parameters," Canada-United States Law Journal,
Vol. 23., 1997, p. 177-200.
(94)
"Split-run" magazines are nominally Canadian editions of U.S.
periodicals that enjoy cost advantages because of their large circulations
and that have also attracted significant Canadian advertising revenue.
In response to competition from split-runs, Canada has introduced various
measures that discriminate in favour of the domestic Canadian magazine
publishing industry. On U.S. appeal to the WTO, recent panel decisions
have ruled against some of these measures, forcing Canada to consider
other ways to support domestic magazines that will not run afoul of international
trade rules. A bill to that effect, C-55 An Act respecting advertising
services supplied by foreign periodical publishers, was introduced
in the House of Commons on 8 October 1998 (accessible on the parliamentary
internet site at http://www.parl.gc.ca).
However, a report from the U.S. International Trade Commission released
a few days later strongly attacked Canadian policies to protect culture
in international trade and investment negotiations. U.S. Trade Representative
Charlene Barshefsky was also quick to condemn the new Canadian legislative
measures as "protectionist and discriminatory."
(95)
"Canadas Copyright Laws Violate NAFTA," The Financial
Post, Toronto, 12 March 1998. For a detailed examination of the underlying
issues, see Lesley Ellen Harris, Copyright Issues in Trade Agreements,
Research Report prepared for the Canadian Conference of the Arts, October
1997.
(96)
Keith Acheson and Christopher Maule, "The Culture of Protection and
the Protection of Culture A Canadian Perspective in 1998,"
Carleton Industrial Organization Research Unit Working Paper Series,
Carleton University, Ottawa, February 1998, p. 21; also an earlier essay
in this series by the same authors, "Canadas Cultural Exemption:
Insulator or Lightning Rod?", 1996.
(97)
"Ottawa Group Forms International Alliance of Culture Ministers,"
Department of Canadian Heritage, News Release, Ottawa, 30 June
1998.
(98)
Final Report of the Working Group on Cultural Policy for the 21st Century,
Canadian Conference of the Arts, June 1998 (electronic version available
at http://www.culturenet.ucalgary.ca).
In a preliminary report released in January the working group concluded
that:
the value of
the [FTA/NAFTA] exemption was seriously diminished because of the retaliatory
provisions which act as a deterrent for new domestic cultural initiatives.
The decision of the United States to use the World Trade Organization
to circumvent the FTA/NAFTA exemption was also regarded
as a
further indictment of the use of similar provisions in other agreements
to fortify Canadian cultural sovereignty. (Internet copy, p. 2.)
In the June final
report the working group recommends that:
The Parliamentary
Subcommittee on International Trade, Trade Disputes and Investment convene
hearings as soon as possible to give shape and substance to a declaration
of Global Parallel Rights, which would form an ongoing reference point
for the elaboration of international trade and investment agreements
as a condition of Canadian ratification. This task should be completed
before the Millennium Round of the World Trade Organization negotiations
in the year 2000. (Executive Summary and Key Recommendations, Internet
copy, p. 7.)
(99)
David Long, "Canada-EU Relations in the 1990s," in Fen Osler
Hampson and Maureen Appel Molot (eds.), Canada among Nations 1998:
Leadership and Dialogue, Oxford University Press, Toronto, 1998, p.
199.
(100)
Standing Senate Committee on Foreign Affairs, European Integration:
The Implications For Canada, Ottawa, July 1996, p. 36.
(101)
The detailed information that follows has been sourced largely from Foreign
Affairs and International Trade Canadas annual market access document
entitled, Opening Doors to the World: Canadas International Market
Access Priorities 1998.
(102)
In contrast to the shifting trend in exports, the share of total imports
(about 10%) sourced from the EU has not budged materially in the past
15 years.
(103)
Other contributors include the sluggish economic conditions in Europe
through much of the decade, as well as an appreciation of the Canadian
dollar.
(104)
The EU market is already greater than the U.S. market.
(105)
The Conference Board of Canada, Strengthening Canada-European Union
Business Relations, Report Number 203-97, July 1997.
(106)
Canada continues to face the full effects of the EUs common external
tariff.
(107)
Canadian products that could benefit from improved access to the EU market
include aluminum, copper, non-ferrous metals, agricultural products, fish
and fish products, wood products, chemicals and telecommunications equipment.
(108)
Commission Approves Draft Action Plan for Transatlantic Economic Partnership,
Brussels, 16 September 1998 (Internet version accessible at http://www.europa.eu.int/comm/dg01).
The relationship of transatlanticism to trade multilateralism at the WTO
level is usefully explored by Richard Steinberg in a recent article which
suggests that:
...in the near
term, uncertainty about the future of liberal multilateralism will prevail:
the current combination of bilateral, regional, and multilateral trade
policies being pursued by the transatlantic powers could evolve into
increased transatlantic cooperation that will buttress liberal multilateralism,
or it could decay into increased transatlantic competition and catalyze
competitive regionalization.("Great Power Management of the World
Trading System: A Transatlantic Strategy for Liberal Multilateralism,"
Law and Policy in International Business, Vol. 29, Winter 1998,
p. 208.)
(109)
For further details and analysis see Preparing the EU-MERCOSUR Association:
Benefits and Obstacles, Madrid, Institute for European-Latin American
Relations, Briefing Paper, July 1998.
(110)
David Long, "Canada-EU Relations in the 1990s," in Fen Osler
Hampson and Maureen Appel Molot (eds.), Canada among Nations 1998:
Leadership and Dialogue, Oxford University Press, Toronto, 1998, p.
204.
(111)
Notes for an Address by the Honourable Roy MacLaren, Minister for International
Trade, to the Royal Institute Of International Affairs, London, England,
Foreign Affairs and International Trade Canada, Statement 95/32, 22 May
1995, p. 2.
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