Free Trade Under Fire in Canada

ImagePlans to deepen Canada’s embrace of trade liberalization and deregulation are running into new pockets of resistance. Following a flurry of news coverage and public debate around the Security and Prosperity Partnership, when rock-carrying undercover police officers infiltrated civil demonstrations in Montebello, another wave of protest has risen in western Canada over a new trade deal between British Columbia and Alberta. Embracing the North America Free Trade Agreement (NAFTA) model, this new accord goes by its acronym ‘TILMA’-the Trade, Investment and Labour Mobility Agreement. Though only the two provinces have signed on to date, Prime Minister Stephen Harper is encouraging all provinces to adhere to the accord, possibly bringing about an unparalleled level of liberalization among the world’s most industrialized nations.

TILMA was negotiated absent any public debate or legislative consultation and signed between the provinces of British Columbia and Alberta on April 1, 2007. Since that time labour unions and NGOs have been challenging TILMA as undemocratic, anti-worker and a threat to human health and the environment. On September 26, 2007, they were joined in opposition by virtually every municipality in BC. The Union of British Columbia Municipalities (UBCM) passed a near-unanimous resolution confronting TILMA, demanding either profound changes to the accord (such as the exemption of all BC municipalities from TILMA’s reach) or its termination. The resolution may have the eventual effect of killing TILMA.

TILMA 101

TILMA was designed to rollback environmental and public interest regulations in both provinces. It is a radical agreement under which any decision that is deemed to be an obstacle to the profits of private investors can be challenged, mirroring at a local level the private-over-public trend set in motion by NAFTA, specifically the infamous Chapter 11 and its chilling effect on government action in the U.S., Canada and Mexico. As a legally binding agreement, TILMA constrains the provinces and their "entities", including municipalities and school boards, from enacting or strengthening decisions made in the public interest if they impede the ability of a private firm to maximize profits.

For example, many municipalities have chosen to design government purchasing standards for various goals, such environmental protection or boosting the local economy. Likewise, local governments provide grants and subsidies to fulfill a range of objectives, based on the values held in their communities. But with TILMA, such concerns as green/ethical purchasing, fair trade, global warming, supporting local businesses and even certain zoning standards are deemed less important than the access of Albertan companies to BC markets and consumers (and vice-versa). Now these types of policies will be open to challenge. And as with NAFTA, TILMA hides the process of dispute resolution from public scrutiny, invoking secretive tribunals to rule on public matters.

In these tribunals, the province assumes the sole responsibility for ‘defending’ local decisions that are challenged under TILMA. Under this arrangement, the city of Vancouver could hypothetically take meaningful action to confront climate change, only to have it contested by a private firm from Calgary and ‘defended’ in a quasi-court by the same BC Premier Campbell that has clearly shown its priority of the private business over social principles. At no point can Vancouver councilors, let alone the public, argue their case in the tribunal for the provision they approved. In this respect, TILMA represents an anti-democratic power grab, centralizing decision-making in the hands of the Premier and unaccountable panels of individuals selected by the provincial governments.

Despite its parallels to NAFTA, some have argued that TILMA actually charts new territory in favoring corporate interests over social objectives. The Canadian Centre for Policy Alternatives outlined one such difference:

TILMA goes far beyond NAFTA in enabling private investors to challenge governments. Under NAFTA, investors have to prove that their investment has been ‘expropriated’ by a government regulation, something NAFTA panels have tended to interpret as meaning a regulation has to substantially interfere with a business. In contrast, TILMA directly targets regulation and gives grounds for complaints simply on the basis that an investment has been restricted or that a regulation in one province is different from that in another.

The anti-democratic process by which TILMA was negotiated has been another leading criticism. After closed-door negotiations between BC and Alberta, the trade deal was rolled out as a fait accompli, despite its potentially far-reaching impacts for both provinces. That the Campbell Administration is insensitive to public sentiment is not news to British Columbians; in fact, it is entirely logical that an agreement which binds the hands of municipal governments to establish local rules and standards would be shielded from public scrutiny in its promulgation. Both the means and the ends are centered on limiting public/civic participation and increasing the rights of investors.

TILMA is expected to harm workers of BC and Alberta. Among TILMA’s principal objectives is addressing labour shortages in the provinces, but its ‘labour mobility’ provisions raise profound issues over workers rights. Here, the agreement calls on professional associations from the two provinces to meet and reconcile the differences in certification by April 1, 2009. But whatever mobility gains TILMA might deliver are likely to happen at the expense of weakened training systems, certification and apprenticeship standards because TILMA will result in a reduction of standards to the lowest common denominator. By deregulating and lowering qualification standards, the agreement is likely to worsen labour conditions.

Although TILMA is barely six months old, private firms in Canada and the U.S. are already discussing its expansion into Pacific Northwest border states, raising questions about the broader North American movement toward ‘deep integration’. Sub-national accords like TILMA are encouraged within the U.S., Canada and Mexico’s new framework for free trade and security, the Security and Prosperity Partnership (SPP), the subject of the aforementioned meeting and protests in Montebello. By linking trade liberalization, which has lost public support in recent years, to the dominant discourse of security from terrorism, the SPP aims to once again further political and economic objectives by invoking the memory of September 11th. Such an agenda helps explain why undercover police with rocks impersonated protesters: a violent clash would have helped to legitimize their trade plus security program.

Free trade and expanding inequality

Canada’s growing income inequality may be one of the reasons Canadians are resisting a deeper free trade plunge. According to a recent report released by Statistics Canada, the median net worth of Canadian families receiving the upper fifth of wealth distribution grew by 19 percent between 1999 and 2005, while remaining the same for the bottom fifth of the population. From 1984 to 2005, the value of the bottom fifth’s assets never exceeded that of their debts.

The link between rising inequality and trade liberalization is a well-documented phenomenon, irrespective of a country’s level of development, as a result of trade agreements’ downward pressure on wages and the increased ability of firms to move plants overseas. A 2003 study by the Economic Policy Institute describes how what they call the ‘threat effect’ works:

Â…firms threaten to close plants and move them abroad while bargaining with workers over wages and working conditions. Employers’ credible threats to relocate plants, outsource portions of their operations, and purchase intermediate goods and services directly from foreign producers can have a substantial impact on workers’ bargaining positions. The use of these kinds of threats is widespread. A Wall Street Journal survey in 1992 reported that one-fourth of almost 500 American corporate executives polled admitted that they were ‘very likely’ or ‘somewhat likely’ to use NAFTA as a bargaining chip to hold down wages.

The relationship between free trade and inequality has not been lost on Canadians. Peter Julian, Member of Parliament and a critic of trade liberalization slammed free trade policies for engendering a "massive prosperity gap". "Canadian families have seen a regular erosion of their income," explained Julian. "Even when taxes and government transfers are taken into account, most Canadian families are poorer than in 1989."

Growing opposition to TILMA

TILMA was originally initiated as a discussion among three provinces, with Saskatchewan joining BC and Alberta. However, after assessing the likely effects of TILMA, Saskatchewan opted out, citing the accord’s overly broad scope and unanswered questions. Commenting on Saskatchewan’s withdrawal, Council of Canadians’ Carleen Pickard remarked, "Unlike in British Columbia and Alberta, the government of Saskatchewan actually consulted academics, experts and citizens and concluded that TILMA is a bad deal."

The Union of BC Municipalities resolution represents another significant blow to TILMA, and may ultimately have the effect of defeating the accord. Arguing that TILMA has the "potential to have far reaching negative impacts on local government objectives", the UMBC resolution puts forth three options to the Province of BC: (1) change TILMA to address the extensive concerns detailed by the UMBC, (2) exempt all local governments from the accord, or (3) withdraw the province from TILMA. Even the first option, the only one that would not completely kill the trade pact, would gut it beyond recognition.

It is too soon to say that TILMA has gone the way of, say, the collapsed talks toward creating a Free Trade Area of the Americas (FTAA), but the momentum is now on the side of those urging a more progressive approach to trade and integration. If there is a silver lining, it is that trade policy is back on the Canadian agenda and that people are mobilizing around it. The contestation over TILMA creates political space for broader debate over economic liberalization, such as the impact of NAFTA and whether that agreement is good for Canada, considering the nation’s growing income disparities. A half a century ago, Karl Polanyi explained how the social dislocation associated with an unrestrained free market provokes a spontaneous backlash by social forces acting in self-protection. Perhaps Canadians are now ready to fight back.

Jason Tockman works for the Teaching Support Staff Union in Vancouver, BC, while writing his MA thesis on trade policy in Latin America. He can be reached at coordinator@tssu.ca.