What your Mama never told you about NAFTA
A look at Canada’s oil, Chapter 11 and how it affects you
Signy Holmes, Staff
Illustration by Jessica Koroscil
Let’s get one thing straight: NAFTA is boring. Sure, it would be nice if everyone took the time to understand Canada’s most important trade agreement, but let’s be honest here: wading through pages of legal jargon? Not on most people’s to-do list.
All the same, the North American Free Trade Agreement affects all of our lives, whether we’re big business owners or not. Softwood lumber and its associated drama are just the tip of the iceberg — the aspects of our lives influenced by NAFTA run the gamut from the price you pay for gasoline to the neurotoxins you breathe and the services our government is allowed to provide.
What’s mine is yours
It may or may not have struck you as interesting that, although Alberta has oil reserves estimated to be in excess of 1.6 trillion barrels, our gas prices are skyrocketing along with the Americans’. We aren’t the ones with an oil shortage, so why are we paying the price?
What came with NAFTA and the FTA (a Canada-U.S. free trade agreement) was the obligation to sell over 60 per cent of the fuel produced in Canada to America. Our oil prices are also tied to theirs — we are unable to charge Americans a different price for our oil than we charge Canadians. We have surpassed Saudi Arabia to become America’s main supplier, but we exert nowhere near the influence over oil prices that OPEC countries do.
Saudi Arabia and Venezuela, along with other oil exporting countries, give their own citizens a better price for oil and gas than they charge for export. The fact that we are unable to do the same started to become a nuisance around the time gasoline prices first pushed over the dollar mark.
The great American energy drain could pose an even greater problem in the future. “Peak oil,” the point at which the demand for fossil fuels such as oil is greater than the capacity to produce it, is a growing concern, both nationally and globally. The United States — having reached this point with domestic production in the 1970s — is currently the world’s largest net oil importer.
So what will happen when Canada reaches this point? We will still owe the Americans over 60 per cent of our oil production, even if we need that oil for ourselves. Canada could be forced into a shortage situation even if we were producing enough oil to meet our needs, simply because of agreements signed by past governments.
This scenario aside, many would oppose a change in trade patterns. A major advantage of trading with the Americans is shipping costs. John Palmer, economics professor at the University of Western Ontario, has stated that “we would force Canadian producers to pay more to ship oil to China instead of the United States. In the process, we would further strain Canada-U.S. relations while donating cheap oil — by probably subsidizing the transport costs — to China.”
A Canadian oil crisis seems unlikely: what about those billions of barrels of Albertan oil? What is rarely mentioned is that natural gas is burned in order to get the oil out of the tar sands. What it comes down to, then, is that not only are we required to ship off over half of our oil production, but in many cases we must consume yet another limited energy resource to do so. We are, in essence, paying for the privilege of providing the Americans with a guaranteed supply of oil.
Mexico, significantly, refused to agree to the same energy trade restrictions that we did.
You have the right to do what we tell you
One of the most infamous parts of NAFTA is Chapter 11, which gives companies the right to sue for damages if they feel the actions of a government have cost them revenue.
Although the original intent of Chapter 11 was to protect investors from discrimination by governments, it has also resulted in several lawsuits against the Canadian government, leading to millions of dollars in payoffs.
Would you like to know where your hard-earned tax-dollars have gone? Well, among other things, they have helped ensure that you have the continued chance of inhaling MMT, a gasoline additive that contains manganese, a known neurotoxin that can cause symptoms similar to Parkinson’s.
The story of Canada’s attempt to ban this additive begins in 1997. The antagonist was Ethyl Corporation, a Virginia-based chemical company with a storied past. Back in 1922, Ethyl began producing tetraethyl lead, which was used to make leaded gasoline. Although workers in Ethyl’s New Jersey plant experienced hallucinations and convulsions, which might have lead to the deaths of five people, it was 50 years before the U.S. government did anything to keep tetraethyl lead out of gasoline. Meanwhile, that lead had been finding its way into all sorts of awkward places, from water and soil to the brains of children.
So when the Ethyl Corporation developed MMT, which is imported into Canada from the United States in concentrated form, the Canadian government decided to place a ban on the import of MMT in 1997.
The problem, however, was the wording of this ban. Rather than a total ban of the additive, it was decided to ban “the import and inter-provincial transport of MMT.” Slight though the difference may seem, it gave enough wiggle room under Chapter 11 for Ethyl Corporation to sue the Canadian government for $251 million.
Ethyl Corp complained that, under the new legislation, they would have to build a plant in every province to legally sell their product. It didn’t matter that the intent of the law was to prevent them from selling any of their product, only that the law was costing Ethyl Corp its business and, under Chapter 11, it was the responsibility of the government to pony up any lost profits.
NAFTA cases are settled by a secret tribunal, whose decisions supersede the decisions of individual governments even though the tribunal is not elected and is not accountable in any way to the public. For all we know, they meet under the full moon and cast coloured stones to see who should win each case.
Faced with a payoff they couldn’t afford, the government decided to settle with Ethyl Corp. This meant a reversal on the ban, $13 million in “damages and legal fees” paid to Ethyl Corp, and, worst of all, a statement issued for use in Ethyl’s advertising that “current scientific information” did not show that MMT in particular was toxic or impaired the function of automotive diagnostic systems.
Postal Wars
The suing doesn’t stop there. In January of 2000, United Parcel Service of America (UPS) decided to make the NAFTA tribunal earn their paycheques by launching a lawsuit against Canada Post. The reason given for this action was that Canada Post delivers parcels and couriers even though it is a government-mandated monopoly for carrying letters.
From UPS’s point of view, it hardly seems fair that they should have to set up infrastructure around Canada when Canada Post already has such things in place. UPS has had success with such cases in the past. In 1994, it successfully pushed for Germany’s national postal service to get out of the parcel business. The case is still pending.
Many of UPS’s claims revolve around accusations of predatory pricing — where prices are set below costs — which makes sense in the case of Wal-Mart, where there is the possibility of driving the competition out of the market and then raising prices to the point where you make a profit. The American company argues that since Canada Post provides a public service of mail delivery, it competes unfairly in the parcel game with Xpresspost and Priority Courier.
The Canadian government is implicated because they are said to have not properly supervised the “government monopoly” over postal service. What’s really frightening, then, is the idea that the corporations could sue governments over other public services, like health care.
Is this likely? Well, not right now, as the government has the right to provide health care. Where things may get messy is if a two-tiered system comes into effect. As in the case where Canada Post finds itself sued for delivering parcels, a two-tiered health care system might find itself in trouble if the government tried to provide cheaper alternatives to the health care solutions “on the market.”
NAFTA has set standards for trade, treatment of foreign investors and relations between the U.S., Canada and Mexico. On the other hand, it has tied Canada to the American economy, a tribunal that the public can’t directly control and a tangled labyrinth of regulations that can and do affect individual citizens of this country — not just the bigwigs.
Trade agreements may be dull, but as 2008 approaches — when most barriers to trade will be eliminated and NAFTA fully implemented — maybe it’s time Canadians as a whole did a little soul searching.
