The Trans Pacific Partnership: Leading Concerns and Proposed Recommendations of the Canadian Labour Movement

Transcription

1 The Trans Pacific Partnership: Leading Concerns and Proposed Recommendations of the Canadian Labour Movement December 2015

2 The Trans Pacific Partnership: Leading Concerns and Proposed Recommendations of the Canadian Labour Movement Introduction Although it is commonly referred to as a free trade agreement, trade is only a small piece of a much larger set of rules and regulations outlined in the Trans Pacific Partnership (TPP). The agreement could be more accurately described as a legal constitution for the rights of corporations and investors. The document has over 6000 pages, and more than 30 chapters. Most of the text is focused on putting strict limits on the ability of governments to legislate in the public interest, reinforcing and extending intellectual property rights, opening new sectors to privatization and foreign investment, and harmonizing regulations. Canada already has free trade deals in place with the TPP countries of Peru, Chile, the U.S., and Mexico. Tariffs with the other TPP nations are currently low. In fact, under the World Trade Organization rules and existing Canadian free trade agreements, 97% of Canadian exports already enter TPP countries tariff free. As a result, economists project a negligible economic upside for Canada (from zero to 0.22% GDP growth by 2025). Eighty percent of Canadian exports to TPP countries are raw or semi-processed goods (e.g. beef, coal, lumber) while eighty percent of imports are high value-added goods (e.g. auto, machinery, computer, and electrical components). We believe that the proposed agreement will reinforce rather than ameliorate this trade imbalance. December

3 Aside from direct implications for the auto and dairy sectors in Canada, an initial reading of the TPP text raises serious concerns in a range of different areas, including excessive intellectual property rights, regulatory harmonization, and investor-state dispute settlement (ISDS). ISDS mechanisms remove disputes from national courts, and give enormous discretion to an appointed cadre of specialists in international trade law and investment law. So-called transparency provisions introduce severe restrictions and intensify corporate influence into the process and content of regulation and government procurement. Canada s experience since the US-FTA and NAFTA shows that, even when trade deals lower tariffs and increase the volume of trade, many workers are left behind. When we compare the narrow and unenforceable nature of labour rights to the rights of investors, this result is unsurprising. It does not have to be this way. Trade deals have the potential to foster economic development, innovation, and value-added production; raise standards for workers; and respect the democratic rights of governments to legislate in the public interest, whether on health and safety or environmental protection. For Canadian labour, whether proposed trade agreements meet those three tests tells us whether we are in a position to support them or not. The purpose of this document is to highlight the concerns of the Canadian labour movement in a few of the above-mentioned areas. The CLC will present a fuller analysis as part of the consultation process announced by the new federal government. Labour Chapter Labour provisions have been attached to free trade agreements since the early 1990 s as developed countries started negotiating such agreements with developing countries, as it was perceived that there existed wide disparities between their respective levels of labour standards and their effective enforcement. The NAFTA was the prototype of such labour-side agreements. December

4 Unfortunately, so far the track record of labour agreements has been modest at best. They have proven largely ineffective in improving the working conditions of workers or supporting their ability to find a voice through collective bargaining. The TPP is presented as the new cutting edge for labour: an agreement that would overcome the deficiencies identified in previous labour agreements. In our view, however, the TPP Labour Chapter will not advance or guarantee fundamental labour rights and workplace standards to all workers. This is because the language around labour rights is too vague or narrowly defined, and because of deficiencies in the enforcement mechanism. Enforcement of the Labour Chapter commitments rests on a statestate dispute mechanism. The discretion of TPP governments to prosecute claims against one another; this stands in sharp contrast to the investor-state mechanisms available to corporations. The TPP labour chapter contains the following deficiencies: The commitment to discourage trade in goods made with forced labour is not equivalent to a commitment to prohibit trade in such goods. It could be met by hanging a poster, for example. The commitment to have laws regarding acceptable conditions of work fails to set standards for such laws. The minimum wage in Brunei could be a penny an hour, for example. The commitment not to waive or derogate from laws implementing acceptable conditions of work in an Export Processing Zone leaves most TPP workers unprotected. The commitment is too narrow to be of clear value to workers. Much of the text employs aspirational rather than obligatory language, like may and endeavor to encourage. Such language does not provide the clear protections workers in the region need to organize, collectively bargain, and raise their wages in a safe and just working environment. December

5 The agreement contains no plan for Mexico, which is and has long been woefully out of compliance with international labour standards. No country should get TPP benefits until it complies with all the obligations of the TPP, including its labour standards. By way of comparison, the following recommendations from the labour movement were excluded from the TPP: Define the core labour standards by referring to ILO Conventions in order to improve compliance and enforceability. To protect workers and raise wages, require that countries consent not to waive or derogate from any of their labour laws (laws implementing either ILO Core Conventions or acceptable conditions of work) regardless of whether the breach occurred inside or outside of a special export-processing zone. Define acceptable conditions of work more broadly to include such concepts as payment of all wages and benefits legally owed and compensation in cases of occupational injuries and illnesses. Include commitments aimed at ensuring effective labour inspections in order to increase compliance with labour obligations. Allow workers to make a complaint based on a single egregious violation, rather than waiting for a sustained or recurring course of action to occur. Remove the requirement that violations must be in a manner affecting trade or investment between the parties, which leaves out most public sector workers. Ensure migrant workers receive the same rights and remedies as a country s nationals in order to prevent abuse of December

6 vulnerable workers and a race to the bottom in wages and working conditions. Establish enforceable rules for international labour recruiters in order to prevent human trafficking and forced labour. Establish clear, universal timelines for consideration of labour complaints. As a means of limiting states discretion to ignore or delay labour complaints, require that a member state that has received a meritorious complaint will promptly and zealously pursue the case. To help raise standards across the region, create an independent labour secretariat that researches emerging labour issues, reports on best practices, and establishes a Trans-Pacific works councils for firms operating in more than one TPP country. Dispute Settlement in the Labour Chapter A dispute of labour practices requires sustained and recurring course of action or inaction in a manner affecting trade or investment between the Parties. Unions have serious questions about the requirement to prove that weaker labour standards affected trade and investment between the parties. This requirement was not present in the NAFTA labour chapter, for example. Governments have final discretion whether to accept and move complaints forward through consultations and dispute settlement. Unions had argued that once a labour complaint has been accepted, the complaint should be permitted to proceed through dispute resolution on all meritorious claims until the matter has been fully resolved. Unions urged the adoption of detailed action plans based on complaints, which could serve as the benchmarks for assessing compliance. The TPP contains none of these requirements. December

7 Past free trade agreements provide that if a country does not implement the final arbitration report resolving a complaint, the parties may enter into negotiations for compensation. A more effective remedy may be targeted suspension of benefits, which would encourage employers to comply in a particular sector, and could encourage better-performing firms to pressure the government to raise standards on worse actors. The TPP does not provide for this. Recommendation The Government of Canada should seek to renegotiate the labour chapter in order to integrate the labour movement s criticisms and recommendations above. Government Procurement & Public Services Community benefit agreements and Buy Local programs foster regional economic development and support the growth of small to medium sized business. All levels of government strategically use procurement as local stimulus, and to build industrial capacity in sectors of critical importance to their region. This type of investment is already constrained by existing trade rules, as we saw when Ontario attempted to support its emerging green tech industry with buy local rules. Given the ambition of governments to engage in significant public investment in infrastructure, particularly in the context of the challenge of reducing the emissions of greenhouse gases, it is imperative to ensure that the local, provincial, and federal governments maintain the capacity to attach performance requirements such as local job creation or sourcing to such investment. The CETA has already been identified as problematic in this area; we will carefully study the TPP for its impact on such programmes. We are also concerned that transparency provisions added into the TPP agreement intensify corporate influence into the process and content of regulation and government procurement. December

8 Recommendations The Government of Canada should carefully review the implications of the TPP for government procurement and delivery of public services at all levels of government. Automotive Industry Tariff Elimination The TPP will eliminate tariffs on trade-in vehicles and vehicle parts among participating states. The rate that tariffs will be phased out varies from nation to nation. Canada s current 6.1% tariff will be reduced in steps over five years, to 5.5%, 5%, 2.5%, 2%, and finally 0%. This is far shorter than the period negotiated by the United States. The TPP will eliminate the 2.5 percent US tariff on Japanese passenger cars over 25 years, and will end the 25 percent U.S. tariff on light trucks over 30 years. Tariff elimination will have the greatest impact on imports of Japanese vehicles and automotive parts. For example, Subaru Canada Inc. already imports most (~75%) of the vehicles it sells in Canada elimination of tariffs will make it cost effective to import even more. At the same time, tight assembler-dealer linkages and other non-tariff barriers in Japan will continue to limit drastically the number of Canadian-made vehicles sold in Japan. Canada s annual motor vehicle and parts trade has been in deficit since 2007; in 2014, the deficit was approximately $16 billion. Canada s motor vehicle and parts exports to Japan are negligible, less than $32 million in By contrast, automotive imports from Japan amounted to $4.5 billion. In 2014, some 40,000 Canadians worked in motor vehicle manufacturing and another 70,000 in parts manufacturing. Unifor has estimated that the TPP could lead to the loss of 20,000 jobs in the auto sector. Canada and Japan have agreed that, in the event of noncompliance with TPP and bilateral obligations, Canada s tariff on December

9 motor vehicles may be snapped-back to the original rate for a period of 100 days. The protection of this snap-back mechanism is available to Canada for a period of six years after our motor vehicle tariff is eliminated. Rules of Origin The TPP also dramatically lowers the existing North American Free Trade Agreement (NAFTA) rules of origin. Automobiles could be imported tariff-free provided that 62.5% of the vehicle had been manufactured in a NAFTA nation. The TPP includes a single set of rules of origin that apply to all parties; in order to qualify for tariff-free trade, 45% of the cost of a vehicle or Canadian-produced part and 40% of other key Canadian parts will have to be from a TPP participant. This is further lowered because key parts will be subject to a deemed originating standard meaning many important auto parts will count as TPP-originating whether or not they actually came from a TPP country. This new approach results in the stated 45 percent requirement actually being closer to percent. The lower rules of origin will increase the incentive to source auto parts from low wage non-tpp nations, as well as act as a disincentive to building new engine and transmission plans in North America. Japanese companies had begun to increase their investments in new engine and transmission plants in North America, but the TPP likely means they will be able to import those components instead of building them on this continent Additional Measures A specialized dispute settlement mechanism with Japan will allow any dispute related to motor vehicles will be dealt with on an expedited basis. Canada and Japan agreed to a special motor vehicle safeguard mechanism. This instrument will act as a safety net to support the Canadian automotive industry from any potential import December

10 surge, and will be available for a period of 12 years after Canada s motor vehicle tariff is eliminated. If a special motor vehicle safeguard is applied, it can remain in place for up to five years. Recommendations The Government of Canada must address the significant and chronic automotive trade deficit with Japan. It should seek an extension of the snap-back mechanism from 6 to 20 years and the motor vehicle safeguard mechanism from 12 to 24 years, and use the threat of employing the snap-back and safeguard provisions to win commitments of Japanese automakers to meet minimum investment and sourcing levels in the Canadian economy. Investor-State Dispute Settlement (ISDS) The TPP would expand the controversial ISDS regime that elevates individual foreign investors to equal status with the 12 sovereign governments signing the deal. The TPP s binding legal language does not constrain ISDS tribunals from making ever-expanding interpretations of the rights countries owe foreign investors and thus the compensation they can be ordered to pay foreign firms. To date, over $170 million in cumulative compensation has been awarded in ISDS claims against Canada, and foreign investors are seeking over $6 billion in damages from the Canadian government. Canadian investors are also increasingly using ISDS procedures to challenge social and environmental regulations in developing countries. With Japanese, Australian and other firms now able to pursue ISDS complaints against Canada, the TPP would increase Canada s ISDS exposure. This includes disputes with the Federal Government about natural resource concessions, government procurement projects for construction of infrastructure projects and contracts relating to the operation of utilities. December

11 TPP ISDS tribunals would not meet standards of transparency, consistency, or due process common to TPP countries domestic legal systems or provide fair, independent, or balanced venues for resolving disputes TPP tribunals will still be staffed by three commercial lawyers allowed to rotate between acting as judges and as advocates for investors launching cases. Such dual roles would be deemed unethical in most legal systems. The TPP text has no requirement for members of a tribunal to be independent or impartial. Rather, the text relies on weak impartiality rules set by the arbitration venues themselves. The text does not include new conflict of interest rules for tribunal members. A so-called Code of Conduct for ISDS tribunal officials was relegated to a side agreement yet to be created and put in place before the pact goes into effect. It is an open question whether such rules will be effective in preventing tribunal members direct conflicts of interest. There is no appellate body provided by the TPP, nor is there a system of outside appeal on the merits of a decision. Tribunal members retain full discretion to determine how much a government must pay an investor. This can include claims for the expected future profits the tribunal surmises would have earned in the absence of the law or regulation being challenged. Even when governments win, under TPP rules they can be ordered to pay for the tribunal s costs and legal fees, which average $8 million per case. There is no exhaustion requirement, i.e., that foreign firms seek redress in domestic legal and administrative venues before resorting to ISDS. Foreign investors are therefore invited to forum-shop. December

12 The TPP retains Minimum Standard of Treatment and "Indirect Expropriation language that grants foreign investors rights to not have expectations frustrated by a change in government policy. Under the TPP, it does not matter if the changed policy came in response to a new financial crisis or health discovery or environmental catastrophe, or if it applies to domestic and foreign firms alike. There are no new safeguards that limit ISDS tribunals discretion to issue ever-expanding interpretations of governments obligations to investors and order compensation on that basis. Instead of real safeguards to stop attacks on nations environmental, health and other regulatory policies, the TPP text protects only environmental and other policies that already are consistent with the agreement. In other words, the TPP's safeguard does not protect policies that would otherwise violate the agreement s rules. The relevant provision (Article 9.15) reads Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent [emphasis added] with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental, health or other regulatory objectives. The TPP includes an overreaching definition of investment that would extend the coverage of the TPP s expansive substantive investor rights far beyond real property, permitting ISDS challenges to government actions and policies related to financial instruments, intellectual property, regulatory permits and more. Pharmaceutical firms could use the TPP to demand cash compensation for claimed violations of WTO rules on creation, limitation, or revocation of intellectual property rights. Currently, WTO rules are not privately enforceable by investors. December

13 The only meaningful new ISDS safeguard included in the final TPP text is an exemption for tobacco-related public health measures that allows countries to elect to remove such policies from being subject to ISDS challenges, either in advance or once a policy is attacked. The tobacco provision begs the question why only tobacco control policies are excluded from ISDS challenges. Our small but growing clean tech sector will be particularly disadvantaged by ISDS. Domestic investors and entrepreneurs will not have access to the same types of remedies as multi-national corporations, because ISDS prioritizes foreign investors. Other aspects of climate policy can be seriously constrained by ISDS as well. As Gus Van Harten (2015) points out, ISDS has already been used to challenge government decisions to phase-out nuclear energy, limit industrial gold mining, regulate gasoline additives, and ban gas fracturing in a major river and estuary. Recommendation The Congress believes that ISDS-like investor provisions already have a proven track record of overreach, acting as costly and effective obstacles to democratic governance. Their maintenance at the heart of newly negotiated agreements remains a core problem for the public interest. We believe these provisions should be amended substantially to limit them to clear and narrow cases of expropriation of tangible property and, at the very least, provide for arbitration processes that are more independent and balanced than is currently the case. Finally, given the current climate challenges, any member-state law, regulation, or policy relating to reducing greenhouse gas emissions and/or achieving emissions targets should be protected from ISDS challenge. ADM:lgf/sd/cope225 December