Submission to NAFTA Consultation

Here is my submission to Global Affairs Canada on the NAFTA Consultation which closes today. (pdf)

July 18, 2017

To Global Affairs Canada /Trade Negotiations North America:

Thank you for the opportunity to make this submission regarding the development of Canada’s negotiating objectives for the upcoming renegotiation of the North America Free Trade Agreement (NAFTA).  In formulating these objectives, Canada should adhere to three key principles. First, there needs to be much greater transparency throughout the whole process. Second, an overly broad view of trade barriers must be avoided in order to protect Canada’s legitimate policy space. And finally, NAFTA’s Chapter 11 must be replaced with a better dispute settlement mechanism that does not undermine the ability of public agencies to enact lawful measures within their established areas of jurisdiction.

Ensure Greater Transparency

Canada should insist at the outset that there needs to be much greater transparency than there was for the negotiations for the Trans-Pacific Partnership (TPP).  Canada came to the TPP negotiations late so was required to go along with the process as it had been established by the other parties. But there is no reason this flawed model based on secrecy needs to be adopted in the NAFTA context.  Since the negotiations will result in an agreement that the government will want to implement into law, presumably on an “all-or-nothing” basis, the public must have the ability to respond to proposals at an individual level. Once the agreement is finalized, it will be difficult to have any meaningful debate about particular clauses or chapters. When agreements are conducted in secret, the public is precluded from participation and given the anticipated broad scope of the negotiations this is simply not acceptable.

Canada can show its commitment to greater transparency right from the start by developing a clear set of negotiating objectives.  While this current consultation is a start to that process, more will need to be done. After the government publishes an initial draft of its objectives, the public should have another opportunity to comment on and suggest specific changes to it. Specificity is important because the negotiating objectives should not just be a rehash of the failed TPP, but should instead demonstrate a fresh and creative approach. Taking more time for another round of consultations and public comment might well slow down the process a little bit, but it would be well worth the effort to get the objectives right from the start,

Avoid impinging on sensitive areas of domestic policy

One of the consistent criticisms of the TPP was that it extended well beyond trade matters and intruded into the policy space that democratic sovereign states legitimately need to maintain. I will focus here on the area of intellectual property (IP) and digital rights as an example. We already have international IP standards contained within the WTO-TRIPS and World Intellectual Property Organization (WIPO) frameworks. All three NAFTA members also have intricate and well developed internal policy mechanisms in place with respect to IP issues. For example, Canada is currently undertaking a five year review of its Copyright Act that was mandated by the last general revision in 2012.  Trade negotiations are simply the wrong venue for developing the necessary balance in a controversial and nuanced policy area like IP. These rules are sensitive and impact a variety of domestic issues like public health, the costs of medicines, cultural production and the availability of teaching and learning materials. Canadian courts have been very clear that IP laws involve a sensitive balancing of different interests. This sort of balancing needs to be made in the Canadian context and the layering on of additional  IP rules and restrictions under the guise of a trade agreement is policy laundering pure and simple.

This problem is only exacerbated when the negotiating objectives are not well articulated and the process is marked by secrecy.  Extending copyright and patent terms and increasing penalties is more a reflection of the desires of special interest groups (i.e., the entertainment and pharmaceutical industries) than a legitimate trade issue. The international IP system has historically been premised on the need for protection of foreign nationals on an equal footing with domestic residents while at the same time preserving adequate policy space for nations to develop their own laws based on their particular needs. These concerns are more than adequately addressed in the existing WTO-TRIPS / WIPO framework.

Yet the IP industries in the U.S. (i.e., pharmaceutical and entertainment interests) have persistently lobbied for expansionary IP provisions including longer Patent and Copyright terms. This insistence on imposing U.S. levels of IP “protections” (or “restrictions” depending on your point of view) is reflected in the just-released negotiating objectives from the United States, which includes:

“Ensure provisions governing intellectual property rights reflect a standard of protection similar to that found in U.S. law.” https://ustr.gov/sites/default/files/files/Press/Releases/NAFTAObjectives.pdf at p. 9)

Canada must insist on its sovereign right to maintain IP policies which differ in some respects from U.S. law, and to conduct its own domestic policy review processes. The negotiation objectives should make this point very clear.

Beyond IP, there are other areas of digital and online policy that are of concern. Under current law, there are significant differences between the privacy protections afforded to individuals in the U.S. and Canada concerning the collection and use of their personal information. Given these different levels of regulation, Canadians have legitimate concerns about problems with cross-border data flows. The Province of British Columbia requires that public bodies ensure (subject to limited exceptions) that “personal information in its custody or under its control is stored only in Canada and accessed only in Canada.” (B.C. Freedom of Information and Protection of Privacy Act, Section 30.1). Nova Scotia has a similar requirement and Quebec requires that information must receive “equivalent” protection as under Quebec law before personal information can be released outside of the province.  At the federal level, Canada has a far-reaching law pertaining to the protection of personal information held by private sector organizations, and has the benefit of the independence and expertise of the Office of the Privacy Commissioner (OPC).  These are all legitimate areas of provincial and federal jurisdiction. Yet the U.S. negotiating objectives seek to:

“Establish rules to ensure that NAFTA countries do not impose measures that restrict crossborder data flows and do not require the use or installation of local computing facilities.” (p 9)

Read broadly, this objective would not only subject provincial data storage measures to challenge, but could also impede the ability of the OPC to engage in its mandated enforcement activities.

Another related objective that is troubling concerns the disclosure of source code:

“Establish rules to prevent governments from mandating the disclosure of computer source code. “ (p. 9)

Canadian privacy regulators need to retain the flexibility to mandate such disclosures in some circumstances in order to properly protect consumers from vulnerabilities and flaws in devices associated with the Internet of Things. It is imperative that the Canadian negotiators make it clear from the start that they are not going to negotiate away the rights of governments to enact enforceable rules for the protection of personal information, including local storage requirements or rules concerning access to code. For clarity, these points should be clearly stated right up front in the negotiation objectives.

Another puzzling and potentially problematic clause in the U.S. objectives statement pertains to the telecommunications industry. It says:

“Promote competitive supply of telecommunications services by facilitating market entry through transparent regulation and an independent regulator.” (p. 8)

Canadian policymakers have been grappling with the future of the Canadian telecom landscape, and the CRTC already provides transparent and independent regulation aided by their considerable specialized expertise in this area. Market entry is a subtle and complex area of regulation. The issue of foreign ownership of telecom entities has been particularly controversial and while opinions vary considerably, it is clear that there are uniquely Canadian factors that must be taken into account in order to maintain the difficult balance between Canadian ownership and control and greater competition. While this objectives statement is somewhat cryptic, it is important for Canada to retain the independence of the CRTC (and the courts) with respect to granting entry into the Canadian market for telecommunications services.

In an era of rapid technological development, it is critical for nations to protect their domestic policy space to be able to respond to changing circumstances. This need is especially acute in technology-rich areas such as intellectual property, privacy, telecommunications and internet policy. Including these dynamic areas of law within the constraints of a trade agreement will inevitably cause policy “lock-in,” will be an impediment to innovation, and will detract from Canada’s competitive advantages in these fields

Reject direct investor initiated dispute mechanisms

Without question one of the most controversial aspects of NAFTA that needs considerable revision is the dispute settlement provisions contained in its Chapter 11. This gives private parties the right to directly challenge actions of government in a way that unfairly benefits corporations at the expense of the integrity of the public policy process. The Investor-State Dispute Settlement (ISDS) provisions in the TPP suffered from the same problem and proved to be the most controversial part of the agreement. These measures are inherently anti-democratic, they give too much weight to the needs of international corporations, and they threaten to impose a regulatory chill not only at the federal, but also at the provincial and municipal levels of government.  We can no longer justify this constraint on policy-making as it represents a serious threat to our sovereignty as a nation.

Canada has not fared well under NAFTA’s Chapter 11. Canada has become the “most-sued” of the NAFTA members and according to a recent report has been the target of over 70% of all NAFTA claims since 2005 <https://www.policyalternatives.ca/publications/reports/nafta-chapter-11-investor-state-disputes-january-1-2015>.   This number is especially disturbing  given that Canada’s population (estimated at about 35 million) is so small compared to the U.S. (over 320 million) and Mexico (over 120 million). One explanation might be that Canadian governments have been particularly engaged in passing beneficial health and safety measures, particularly with respect to environmental protection.  Given the current policy environment, this engagement is likely to continue and the regulatory gap might be expected to widen. This could be a particularly advantageous time for Canada to try to fix NAFTA’s broken dispute resolution system. There are other less intrusive means to settle disputes such as the state-to-state model employed by the World Trade Organization.

Conclusion

The government needs to set out a clear and understandable set of negotiating objectives before the NAFTA talks commence. Following the review of the submissions in this initial consultation, a draft set of negotiating objectives should be issued and they should be subject to another round of further comment. It would also be useful to be able to have more time to fully digest and comment on the negotiating objectives of the United States that was just released yesterday.

At the start of the negotiations, Canada should insist on a level of transparency which would include the release of interim negotiating texts beyond the initial objectives statement. All of the interested stakeholders should be on an equal playing field so preferential access to information for some parties must be avoided. The negotiating objectives should clearly delineate what Canada seeks to accomplish but also what is not going to be negotiated away. It may well be that the United States negotiators will not be open to addressing some of the concerns being raised. But this should not dissuade the Canadian negotiating team from holding their ground and if necessary walking away from the process.

Finally, once an agreement is reached it should not be presented to Parliament as a single and indivisible Omnibus measure, but rather individual chapters should be subject to scrutiny and debate on their own merits.

Thank you again for the opportunity to participate in this consultation and if I can clarify any of my points please do not hesitate to contact me at <strosow@uwo.ca>.

Submitted on July 18, 2017 by

Samuel E. Trosow, Associate Professor
University of Western Ontario
Faculty of Law / Faculty of Information & Media Studies

[link to pdf]

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