An Ill conceived Treaty with ZERO public debate…

Ever since my University days, I have been interested in Trade Theory, and the potential benefits of reduced trade barriers. Despite the strong currents opposing `globalisation`around the world, the last three decades have lifted literally billions of people out of abject poverty. Free capital flows have had enormously beneficial effects, ranging from enabling the `agricultural revolution`in India through forward and future contracts for agricultural produce, to the re-allocation of capital from capital-intensive economies like Canada`s, to poverty-stricken regions with little in the way of local capital formation. Even in the capital rich countries, more efficient capital markets have added real and significant wealth, through mechanisms such as arbitrage, and placing simple yet effective hedging and risk control tools like swaps, forward and future contracts in the hands of small entrepreneurs to everybody`s benefit. So yes, I do get it. Liberalised Trade and Investment can be an enormous gift providing `found` resources for all to share.

This week we Canadians have been treated to a surprise by our Conservative Government.  Apparently, the Government does not have to get anybodies permission, let alone Parliaments to negotiate and implement Trade agreements with far-reaching consequences. The Globe tells us that this treaty was signed on September 9, and the first notice was when Parliament was informed of it`s existence earlier this week. Today, I followed a link from a news aggregator I have used for years, and read this article in the Toronto Star.

The terms of the treaty include provisions for any Chinese corporation to bring action against any level of Canadian Government if any investment they made in Canada is affected by Canadian  Government actions. These actions will not be brought in a Canadian Court. They will be brought in secret, before a secret Trade tribunal. According to the Star, the treaty cannot be amended or changed for 31 years. Theoretically, trade actions may be brought against any Chinese government by Canadian investors, so it is hoped that Canadians who invest in China can have recourse under the same terms. This is about the biggest bullshit treaty I have ever heard of. I have two major beefs with it.

First beef is about process. This is clearly a major step, and it is irrevocable. Nobody ever campaigned on the merits of this treaty. In fact, beyond the fact that it was being negotiated, the terms, conditions, and implications have been hidden from public view until a fait d` àccompli was presented this week. It is totally unacceptable that such a key element of our trade policy should be sprung on us without even a semblance of public debate, and Parliamentary approval. I remember very well the NAFTA debate. Whether or not you agreed with it, nobody in Canada had any doubt as to the legitimacy of that particular treaty. It was thoroughly explored in full public view. It`s imapct on Canadian sovereignty, and the economic arguments underlying it were given a very thorough public airing, and a General election was fought with NAFTA being the main issue. I happen to think that the public debate was of nearly as much value as the treaty itself. Canadians learned a lot about Trade mechanisms, from dispute resolution, to the trade-offs between Canadian and US negotiators. So there it is. Treaties that purport to be in Canada’s interest, and that will bind a generation (at least) of Canadians to it`s terms should be well understood, and agreed to by at least a plurality of Citizens.

Second beef is with the terms. What kind of freakin idiot expects a regime that does not abide by the rule of law to adhere to this treaty? I can see China`s interest very clearly. They can rest assured that Canadian Law is impartial, and the letter of the law and any treaties with the force of law shall in fact be upheld. If a ruling goes against a municipal government obliging them to favour a Chines investor in any way, well that municipality will hew to the law, and obey the court. In exchange for protecting Chinese investments in Canada, we will have reciprocal treatment in China. Yeah, right. And I have a bridge for sale, real cheap. Let us say that a Chinese municipality decides to arbitrarily seize a Canadian companies real property in China. Is there any realistic prospect that a local government will obey any ruling that the property must be returned to the owner? That assumes that any such ruling could be obtained, which as the Star article points out, has NEVER ONCE HAPPENED in a trade dispute between Canada and say the US in NAFTA. The long and short is that the reciprocity offered is meaningless and un-enforceable. And guess what, if we should discover that China is after all a scofflaw nation, and we want OUT of the deal, we are screwed. The treaty cannot be touched for 31 years.

I do not hate China. In fact, I wish the Chinese people the very best. They have been screwed over pretty badly by their Emperors, by Colonial powers, by the Nationalists, the Japanese, and last but very goddamned far from the least their Communist oppressors. China has every prospect of becoming a great country, and one day may even become a pillar of enlightenment to the world. Why not? People are people everywhere, and the attractions of liberal democratic values are pretty near universal, so once Chinese actually have a say in their own governance, I will bet you dollars to donuts their polity will quickly adapt to the needs of their citizens. My disagreement is based upon the fact that this treaty was hastily conceived, and has every appearance of being a giveaway created for the sole purpose of inducing the Chinese government to purchase our resources, and the Canadian companies that are expert at extracting said resources. Until both the process followed in adopting this treaty, and the incredibly lop-sided dispute resolution mechanisms are fixed, this must NOT be allowed to pass into law. It is irrevocable! We cannot take it back, even once the bastards who foisted it on us are a footnote in the history books.

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2 Responses

  1. I completely agree …!
    But …what can we do ..?

  2. I guess you’re one of those “Free Trade Deniers” Conservative Ed Fast was talking about today, whom threaten Canada’s economic future (see: http://www.theglobeandmail.com/report-on-business/economy/free-trade-deniers-threatening-canadas-economic-future-fast/article4585090/)

    Great article, by the way.

    I have to shake my head, though, and wonder just what the hell we are doing. Why did Harper think this was a good deal for Canada, given that provincial jurisdictions might seek to act on their own over Constitutionally-mandated resource sector issues, and then the feds will be on the hook to defend said decisions, and pay for them. Given that at least half of “Canada’s” losses under NAFTA related to provincial decisions, it strikes me as interesting that Harper would want to repeat efforts (especially given he’s not such a strong federalist). Look no further than to the fun the feds are having with Newfoundland & Labrador’s dispute with Abitibi (or whatever they are called now).

    The secrecy part is really scary, too. At least under NAFTA Canadians knew when we were getting screwed, and the cost.

    For me, I’m clearly concerned about environmental regulations and carbon pricing. Would provincial carbon pricing schemes, such as B.C.’s carbon tax, be at risk if applied to Chinese companies operating in Canada? I don’t believe that there’s been a NAFTA challenge about this, but who knows what might happen in the future, especially as the tax rises per tonne as its schedule to do. I’d hope that the carbon tax is safe, but I just don’t know, and I might not now ever know, given the secrecy.

    Strange (and scary) days indeed, my friend. Thank you for bringing this to my attention.

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