July 2006: Tackling the NAFTA Challenge

“Free trade” clearly a disaster, but how do we free ourselves?
July 1, 2006

Bruce Campbell's article in this issue explains how NAFTA—and its predecessor CUFTA—have worsened living standards and the quality of life for most Canadians. He buttresses his findings with incontrovertible facts and figures. In past issues of The Monitor, many other economists and analysts have made the same argument: NAFTA is a great deal for most Americans, but an economic bust for most Canadians.

Most Canadians, unfortunately, are still not aware of how and to what extent their lives and livelihood have been adversely affected by NAFTA. Yes, they know their wages have stagnated, that many good manufacturing jobs are gone, that the income gap between the rich and the rest of us has widened, that social programs have been gutted, that their environment has been polluted—but few make the connection between these setbacks and NAFTA. And that’s because the connection is not easily discerned.

Whenever NAFTA has made the news in recent years, it was usually in relation to the protracted softwood lumber dispute with the United States. The repeated refusal of the U.S. to stop impeding our lumber exports—in direct violation of NAFTA—and to ignore NAFTA tribunal rulings favouring Canada offered the most striking evidence of the one-sidedness of this trade deal. Clearly, Canadian access to U.S. markets (which NAFTA was supposed to guarantee) would be granted only if powerful American business groups weren’t opposed to it.

The “settlement” of this dispute, in which the Harper government meekly caved in to the twisted U.S. interpretation of NAFTA--even allowing the U.S. to keep $1 billion of the tariffs it had illegally collected from Canadian producers—caused a temporary furore in the media and a lot of public hand-wringing in Canada. But soon the controversy died down and it was back to business as usual. The mouse was content with the elephant’s promise to be more careful where it rolled.

Public opinion polls still register majority support for NAFTA. So we got the worst of the lumber dispute. Shrug. But trade is mostly flowing, the economy is booming, unemployment is down, so what’s the problem?

If you don’t know, read Bruce’s article. He makes it clear that not all our economic and social troubles can be blamed on NAFTA—that NAFTA is just one component (albeit a crucial one) in the broader neoliberal market-driven agenda. But he also emphasizes, as do other free-trade critics, that efforts to alleviate poverty and inequality will be greatly hampered, perhaps even forestalled, by the terms of NAFTA.

This agreement was not really about trade. It was—is—a legal bill of rights for transnational corporations. It frees them to move their operations to places that offer the lowest taxes and labour costs, and the most lax regulatory and environmental constraints. These locations can be within Canada, or, more commonly, in the U.S. or Mexico—or even in South America or Asia—wherever the highest profits can be made from underpaying workers, plundering resources, despoiling the environment.

The conditions these corporations have exacted for staying in Canada are spelled out in NAFTA and WTO treaties. Basically, they allow business activities to take priority over all other considerations. Workers can be exploited, their unions (if they have one) weakened, their security and on-the-job safety undermined. Toxic chemicals can be dumped into the air and water and laced into consumer products. If a government dares to enact laws or policies that threaten profits, corporations can sue such a government directly and either have such laws rescinded or extract millions (or billions) in compensation. (When the federal government sought to ban the use of a cancer-causing gasoline additive some years back, the company promptly filed a charge under NAFTA, forced the government to back down, and was handed $20 million of taxpayers’ money for potential profit losses. NAFTA ensures that profits trump public health. No government has since dared to introduce similar legislation.)

Another egregious clause in NAFTA compels Canada to keep exporting most of its oil and natural gas to the United States. This is being done even though it forces Ontario, Quebec, and the Atlantic provinces to import most of their fossil fuel from other countries. Even if shortages or emergencies arise, NAFTA would compel us to keep sending more of a dwindling supply of oil and gas to Americans than we could keep for use by Canadians. And NAFTA also prohibits Canada from charging Americans more than Canadians have to pay.

This horrific misallocation of Canadian energy resources exposes the true nature of NAFTA. It was intended to allow corporations to maximize profits, even if they did so in ways that were opposed to the interest (even the health) of Canadians. The big oil and gas companies can reap the biggest profits from selling to Americans, not Canadians, so that’s what they do. NAFTA ensures that they can keep on giving priority to U.S. energy needs, and that any Canadian effort to stop them will be blocked by NAFTA.

(It’s significant that the trade negotiators for the Mexican government, which is also a party to NAFTA, insisted that this proportional oil-and-gas-sharing clause be removed from their copy of the agreement before they would sign it. Canada’s negotiators not only accepted the clause; they warmly welcomed it!)

Clearly, NAFTA serves as a straitjacket preventing our federal government (and by extension the provinces) from doing anything that would interfere with corporations’ freedom—even when their activities are detrimental to Canadians’ economic, social, and environmental well-being.

Removal of this straitjacket is essential to preserving what’s left of Canada’s independence and distinctive way of life. But two big impediments stand in the way. The first is that most Canadians still are unaware of the need to get rid of NAFTA. And the second—even more formidable—is that NAFTA is a straitjacket that our federal government willingly strapped itself into and doesn’t want removed.

Ottawa’s fervent embrace of the NAFTA shackles should come as no surprise. The Harper government, even more so than the previous Chrétien government, serves as the political arm of Big Business. Its chief purpose is to keep the corporations happy, to lighten or remove their taxes, subsidize their operations, turn a blind eye to their pollution of the environment.

Such a government will never put the energy security of Canadians ahead of the oil companies’ profit-making. It will never endanger overall corporate profits by testing or controlling the toxic chemicals that corporations use, or by honouring the Kyoto commitment to reduce greenhouse gas emissions by major industries. (Never mind that recent tests found 30 or more cancer-causing chemicals in the blood of all family members tested. The chemicals are essential to corporate profits, so they continue to be approved.)

Such a government will encourage, not prevent, the privatization of more health care services and other public programs and facilities. Any parts of the public sector that offer profit-making potential will be opened to corporate takeover. That’s the NAFTA purpose.

Those of us who see all these horrific effects of NAFTA and the urgent need to free ourselves from its chains face a daunting challenge. How do we go about tackling this problem?

One of the first tasks, probably the least difficult, is to dispel the myth that the “defects” of NAFTA can be “corrected” by renegotiating its terms with the U.S. The absurdity of this approach should be obvious, but anyone still harbouring such a delusion should read Mel Clark’s article on Page 19 of our June issue. Clark is a former Canadian trade negotiator (though not of NAFTA!) who knows from first-hand experience what negotiating with the Americans is all about. He shoots the “renegotiation” idea down in flames. It’s not an option that anyone should seriously consider.

So we are left with two possible alternatives. One is to launch an all-out public educational campaign aimed at showing still oblivious Canadians how ill-served they are by NAFTA. The other is to push for a policy of ignoring NAFTA in pursuing a Canada-first approach, emulating the U.S.-first policy most flagrantly displayed in the softwood lumber dispute.

Both courses have pros and cons. A public education drive would require massive financial outlays as well as the long-term commitment of communications specialists. Such an effort would drain the limited resources of civil society groups, and might well be beyond their capacity to sustain. The disinclination of the corporate-owned mainstream media to cooperate in such a venture would also be a deterrent.

The Canada-first approach is intriguing. Applied to the energy issue, for example, it would entail a unilateral reduction in oil and gas exports to the U.S., imposition of a tax on the amounts we continue to export, and a refusal to comply with any NAFTA tribunal order that we cease and desist and go back to heeding the limits dictated by NAFTA. We would have to remain firm in our new determination to put Canada’s energy security needs ahead of those of the U.S.

The underlying problem with these strategies, of course, is that they both require a Canadian national government that would govern in the public interest rather than the corporate interest.

Let’s say the effort to convince a large majority of Canadians that NAFTA had to go succeeded. What then? Would this lead to an election campaign in which scrapping NAFTA would be the overriding issue? And, if so, would it then lead to the election of a government sufficiently courageous to incur the wrath of both a bellicose U.S. administration and powerful corporations armed with economy-crippling weapons?

The Canada-first strategy might be even more tenuous, in the sense that it also presupposes a Canadian government resolute enough to defy American and corporate power, but also strong enough to violate a still-intact NAFTA. It might be able to rally majority public support behind an initiative clearly seen to be in the public interest (such as domestic energy security), even with the threat of U.S. and corporate retaliation, but would the mouse really feel confident about pulling the elephant’s tail?

The underlying problem with both these scenarios, of course, is that they are based on the transformation of our federal government from compliant corporate pet to brazen beaver. We would need a government comprised of politicians with a completely different ideological bent: prepared to abandon neoliberalism, sever their business ties, shed their “free market” mantra, and commit to policies aimed at closing the income disparity gap and making Canadian society more fair and democratic. It goes without saying that one of the first enabling acts of such a government would be to break the fetters of NAFTA, whether by rescinding or bypassing it.

In other words, no matter how the anti-NAFTA (or pro-fair-trade) activists go about planning ways to shake loose from this oppressive treaty, they have to overcome the towering political barrier, too. The political will is now all for sticking with NAFTA. Changing it to a scrap-NAFTA mindset will be the ultimate challenge.

(Ed Finn is the CCPA's Senior Editor.)