One of the most egregious components of the Canada Free Trade Agreement (CFTA) is the restriction that governments should demonstrate that any new regulations they implement are the least burdensome on corporations and investors of the choices available.
Aside from the knotty question of how to prove they have adopted the least burdensome option, this requirement significantly narrows the options governments can pursue by prioritizing business interests—even if other options, which regulate business more extensively, are more effective in achieving public policy goals.
The criterion for determining if a policy makes sense should not only be whether, or not, it negatively impacts business. It should be its overall impact on Canadian society, taking into consideration the various ways a policy can affect economic and social outcomes.
The CFTA also encourages privatization of public programs and services by promoting competitive tendering and by giving corporations yet another way, beyond Canada’s existing legal system, to challenge provinces that may wish to bring these back into the public sector. It enables private companies to seek to reverse government decisions to end privatization on the grounds that giving preference to public providers denies corporations their right to continue to bid on publicly funded services or programs.
Given its neoliberal focus, it is not surprising to find that the CFTA has no provisions promoting the expansion of public programs, even where there is good evidence that governments do a good job—often serving the public much better job than the private sector—in areas such as health insurance, medical services, electricity, auto insurance and numerous others.
Comparisons with comparable privately provided U.S. programs underscore this public advantage. While we can debate whether, in specific instances, public or private is better, there is something inherently wrong in an agreement that says private is always to be preferred and that has no provision for including public options for promoting a more efficient economy.
This is because the assumptions on which it is founded cannot accommodate the view that governments can do anything better than corporations.
It is significant that proponents of the current rush to eliminate trade barriers say nothing about whether there have been any negative consequences of the CFTA’s existing restrictions on provincial policy tools. They simply assume that smaller, less intrusive government is always preferable.
However, barring provinces from attaching conditions to their procurement purchases, such as local employment, buying locally made goods and services, or requiring investment offsets already hampers their ability to maximize the benefits from what they buy. What we do know is that many countries have successfully used such policy tools to promote their economic development.
Consolidation and centralization of economic activities
Canada’s free trade commitments, including CFTA, have facilitated the consolidation and centralization of economic activities at the expense of some provinces and territories and many regions.
Banking and finance, primarily regulated at the federal level, is increasingly located in Canada’s major urban centres—Toronto, Montreal and, to a lesser extent, Vancouver. Enabling banks to avoid having a local presence, despite the numerous privileges Canada’s banking regulations provide them, has facilitated the financial hollowing out of many communities.
Worse, permitting payday loan stores to move in to replace closed bank branches has exposed many Canadians—especially those on low income—to predatory loan sharks. While there is a good argument that this is precisely the kind of issue that the provinces, territories and federal government should be working to fix, the CFTA does nothing to address this problem.
The current CFTA is integrally connected with Canada’s free trade agreements with the U.S. and other countries. However, this fact is not adequately recognized in the current debate about eliminating its exemptions. Its purpose is to harmonize provincial policies and regulations that Canada has signed. The agreement implements their restrictions on public policy at the provincial level, enabling Canada to avoid the awkward issue of how its international trade agreements override the constitutional powers of provinces.
This means that major sections of provincial legislation have been re-drafted to comply with these obligations. Procurement managers draft bids and award contracts according to these detailed trade rules to the exclusion of other options. Given these restrictions, governments no longer explore adopting policies that might violate the rules. This results in arbitrary restrictions on public policy development.
Canada continues to negotiate agreements based on neoliberal agenda
Trump has demonstrated that he is prepared to revoke commitments the U.S. made in the revised North American Free Trade Agreement (NAFTA) agreement. However, proponents of removing provincial and federal exemptions in the CFTA remain silent on whether they intend to revoke the provisions in the United States-Mexico-Canada Agreement (USMCA) and our other international trade agreements, which permit U.S. corporations, investors and their Canadian subsidiaries full access to federal and provincial government procurement, as well as allowing them to benefit from various regulatory exemptions given to Canadian investors and corporations.
While governments have signalled that they plan to promote ‘buy Canadian’ policies and boycott some U.S. suppliers—something extremely difficult to do, given the high degree of integration of the production of many goods and services—there has been notable silence about removing the offending provisions in the agreements themselves, including amending the text of the CFTA to incorporate these objectives.
Unlike its high-profile search for interprovincial trade barriers, the federal government has made no announcement that it is prepared to re-draft its international trade agreements to remove the privileges given to U.S. corporations.
Instead, it is continuing to negotiate new agreements based on the same neoliberal agenda. The reason it is not planning to re-draft existing agreements is clear: it has no intention of abandoning its neoliberal agenda. Rather, it plans to wait out Trump’s attacks and then return to adhering to the same rules again.
The crisis initiated by Trump underscores the need for positive government action to protect Canadians. Canada certainly can benefit from much more cooperation among provinces and between provinces and the federal government. But this requires a positive, rather than negative, understanding of the potential role of government in our economy.
It means bringing an activist government back into the picture. It means using government policy tools to address key economic challenges, including measures to counterbalance what Trump is now doing.
We need more, not less, control over key economic, environmental and social decisions—control that will enable our governments to respond to citizens’ legitimate aspirations for a better Canada, one that addresses the major gaps in our public and social services and which strives to reduce the enormous inequalities that have emerged so starkly as a result of the free trade agenda.
Given that the purpose of the CFTA is to implement a neoliberal policy agenda and harmonize provincial and territorial polices with Canada’s international trade agreements, it is legitimate to ask whether we need it at all. There is nothing stopping the provinces, territories and the federal government from negotiating agreements to strengthen Canada’s economy. They don’t need the CFTA to do this, as evidenced by the many federal-provincial-territorial agreements currently in place.
Proposals Canadian governments should be focused on
Canada should strengthen labour standards across the country to protect workers and address jurisdictional loopholes that enable companies to shop for the jurisdiction with the lowest labour and occupational standards. The same is true for consumer protection standards. Implementation of ILO conventions should be part of this effort.
Encouraging the more rapid implementation of the National Building Code of Canada 2020 could lower energy consumption and make buildings more resilient to counter the growing impact of the damaging weather events triggered by climate change. It would also contribute to Canada’s efforts to meet its Paris climate commitments.
An agreement between the federal government and the provinces to expand the use of CMHC finances to fund building desperately needed affordable public housing units would go a long way to addressing our acute housing shortage.
Joint financing of the training and apprenticeship programs needed to provide the required workforce would complement this initiative.
Improved co-operation among provinces on electricity sharing through construction of key components of a national, publicly owned grid would facilitate greater energy independence and security by encouraging electricity-rich provinces to provide more to others, rather than adjacent U.S. states.
Building key components of an east-west transmission line is long overdue but requires a collective commitment by governments to make a major public investment in the country’s energy security.
A comprehensive, standardized registry requiring reporting of foreign real estate ownership—something the U.S. already does for agricultural land and many states do for other real property—would provide provinces and municipalities with new tools to manage their housing markets, control ‘flipping,’ oversee agricultural land ownership and address widespread tax evasion.
More extensive corporate disclosure is another area where cooperation among jurisdictions would be beneficial. Canada has the weakest disclosure rules of virtually any major developed country. Companies engage in ‘jurisdiction shopping’ to register in the province with the least transparent reporting requirements. However, the current CFTA gives them access to the entire Canadian market, encouraging a regulatory ‘race to the bottom’.
Cooperation between provinces and the federal government to address tax evasion is another area that needs strengthening. Stronger measures to address money laundering are also required.
Canadians also need improved standards for a wide range of consumer goods as well as consistent and more extensive food safety and packaging regulations to give purchasers the information they need for more informed and healthier choices.
Higher safety standards are needed for a wide range of products, along with policies to prevent ‘beggar my neighbor’ strategies by unscrupulous suppliers shipping from provinces with the lowest standards. Uniform product liability requirements are also needed to better protect Canadians.
These are only a few of the policies where greater cooperation among governments can benefit Canadians. But removing the exemptions from the CFTA is not the right place to start.
Pursuing the free trade, deregulation and privatization agenda that is at the core of the CFTA will further undermine the capacity of our governments to address the challenges that Trump has imposed on us as well as fix the many pressing economic and social needs of Canadians.
We are already more vulnerable precisely because of the impact of 40 years of free trade. Going further down this pathway as a response to Trump’s outrageous tariffs is a response that makes no sense.
