The180·The 180

Scrapping free trade could make Canada great again

Gus Van Harten argues that on balance, free trade deals have left the average Canadian worse off. And if that isn't bad enough, he argues as a nation, Canada has traded away its sovereignty in the name of free trade.
A pair of work boots hang on the security fence outside a locomotive manufacturing plant London, Ontario. It was closed after a labour dispute in 2012, and jobs were moved to Indiana. (The Canadian Press)
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Canadians are in a hole because of free trade agreements like NAFTA, and it's time to stop digging. 

That is the opinion of Gus Van Harten, a law professor at York University's Osgoode Hall Law School. 

He argues in the early 1990s, the rules of trade agreements changed, shifting dramatically away from the classic definition of free trade — reducing tariffs to facilitate trade between countries.  

"Free trade in itself is not an inherently bad thing, it's like breathing in an economy. Who would be against trading with other people? But trade agreements went way beyond that form of free trade to include all kinds of other topics and NAFTA is a good example of that."

In 2002, the three leaders who forged the NAFTA agreement - Carlos Salinas de Gortari, George H.W. Bush, and Brian Mulroney - marked its 10th anniversary in a joint appearance where they reminisced on its beginnings and accomplishments. (J. Scott Applewhite/Associated Press)

In his view, NAFTA set up a framework that left the majority of Canadians worse off, because it built in a host of structural limitations. These include increased thresholds for reviews of takeover bids for domestic companies, limitations on government to regulate their financial service sector, and changing patent rules to favour bigger players. Van Harten says these measures benefit major multinationals, but don't always favour the domestic economy or its citizens. 

When trade agreements are called 'free trade agreements', that's really branding. That's spin. If I'm a bit blunt here, it's designed to mislead people who don't have time to, or the interest to, peel away the layers of thousands of pages of legal documentation.- Gus Van Harten

He says, one of the most damaging changes in NAFTA was an introduction of the concept of foreign investor rights — or the ability of foreign investors to put pressure on governments to prevent laws and regulations they don't like.

It's a concept that manifests itself as investor-state dispute settlements (ISDS).

The problem with ISDS

​Van Harten doesn't quibble with the notion that companies should have a mechanism to argue against regulation that affects their bottom line, but he thinks those avenues can exist in domestic law.  

Law professor Gus Van Harten says he will celebrate if Donald Trump keeps his promise to scrap the Trans Pacific Partnership because he says trade deals like TPP, CETA, and NAFTA have put the majority of Canadians at a disadvantage. (provided by Gus Van Harten)

"What ISDS does is give a special international avenue for foreign investors only to attack the decisions that countries make, to attack things they could never attack in domestic law. It's an extraordinarily powerful avenue of special rights and privileges for foreign investors that no one else enjoys." 

Even though Canadian companies could benefit from that avenue as well, Van Harten says in general Canada's big companies are outnumbered by those from countries like China and the U.S. 

"We don't have nearly as many big players as the other major countries. And those other countries are using their political power to drive the trade agreements in ways that shape the rules in their favour, and in the favour of their big multinationals. So even when we succeed, overall I would argue that Canadians are losing out to a rewriting of the rules that favours the big guys, and to the disadvantage to all of us little people." 

A shopper selects food in the produce section of a Walmart store in 2011 - the company reported a 27 percent increase in fourth-quarter net income that year as the world’s largest retailer benefited from cost-cutting and strong sales overseas. (The Associated Press)

Greater buying power? Great, more cheap stuff in the garage

One of the widely touted benefits of trade agreements has been greater purchasing power for consumers. 

But Van Harten, who admits his own garage is full of cheap stuff, questions why it is that Canadians have come to depend on cheap goods.

To him, the trade-off for greater buying power has been economic security. 

You may be able to buy cheap food from Walmart, or buy cheap televisions from China. But if you lose your job, or if you're able to hang onto your job, your neighbour lost their job, or your children have far less in the way of job prospects. You know, people warned about the race to the bottom 25 years ago. What they got wrong perhaps is how quickly it would happen, but a gradual race to the bottom still ends up in the same place.- Gus Van Harten

Hope in Donald Trump? 

Discussing free trade agreements these days, inevitably leads here:

U.S. president-elect Donald Trump has said he will withdraw the United States from a Trans-Pacific Partnership trade deal — a deal in that Van Harten's opinion is "even worse" for Canada than NAFTA has been. 

Trump has called TPP "a potential disaster" for his country, and though he has made political hay out of criticizing NAFTA on the campaign trail, he is expected to renegotiate the deal.

Van Harten welcomes the idea. 

"If Donald Trump keeps his promise to kill the Trans-Pacific-Partnership, I'll be celebrating that. And I will be sitting in amazement if he actually reforms NAFTA in a positive way, or terminates it, " he says. 

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