Beyond Nafta to a Canada-Europe Transatlantic... -
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Published on: 10/20/1998
Last Visited: 3/8/2003
Mr. Gordon RitchiePartner, Strategico Inc.
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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.
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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 country's 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.)
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A second key issue raised by Mr. Ritchie was NAFTA's 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.)
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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.
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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.
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Mr. Gordon RitchiePartner, Strategico Inc.
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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 Canada's 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 NAFTA's 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)
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