Special Report

Canada-European Union free trade: What's in it for Hamilton?

There are no jobs in CETA. There are only reduced options for communities like Hamilton.

By Stuart Trew
Published October 17, 2011

A ninth round of Canada-European Union free trade negotiations takes place next week in Ottawa. You're forgiven for fighting back a yawn.

For two decades we've been told by governments, economists and the media that freer trade is automatically and necessarily good for countries. They say it is especially good for Canada because we are "A Trading Nation."

But free trade is barely about trade these days and the proposed Canada-EU Comprehensive Economic and Trade Agreement (CETA) is no exception to that rule. In fact, CETA risks permanently compromising Hamilton's future economic and social policy options.

Those who've witnessed first hand the decline of Hamilton's manufacturing base know that free trade doesn't produce jobs. It moves them around. More precisely, it helps employers move jobs other places they can produce things cheaply and on their terms.

Almost two thirds of Americans get this. With unemployment close to 10 percent, trade has become a regular election issue in the U.S. Candidates in the 2008 election, including the President-to-be, ran successful campaigns promising to block more NAFTA-like deals that take jobs away from voters.

The U.S. government gets it too - its own studies show that the U.S. trade deficit consistently climbs with free trade partners.

Antipathy Toward Trade Agreements

This antipathy toward new free trade agreements is partly why it took U.S. President Barack Obama until last week to pass three Bush-era deals - with Colombia, Panama and South Korea - through Congress. He did it with support from Tea Partiers and many Democrats, who will undoubtedly pay at polls for going against their promises to trade-skeptical voters.

Who will benefit from the flip-flop? According to Lori Wallach, head of Public Citizen's Global Trade Watch, it's the already-wealthy corporations of the Chamber of Commerce who stand to gain anything.

Even then it's not much. The Columbia, Panama and Korean pacts combined are predicted to grow the U.S. economy by only 0.1 percent of GDP.

This is peanuts. And what's true of free trade in the U.S. is true in Canada. Only in Canada, where the Harper government is most focused on a comprehensive pact with the EU, we're talking small potatoes - literally.

Canada's trade minister, Ed Fast, used the word potatoes half a dozen times in a recent presentation to MPs on the trade committee to justify a trade deal that will substantially redefine how local economies are governed in Canada.

Municipal Services

CETA will strip cities like Hamilton and the provinces of what few tools they have left to create new jobs, promote sustainable development and enhance public services.

For the first time, CETA will make apply trade and investment-related disciplines to municipal governments, Crown corporations, universities, hospitals and school boards - the so-called MUSH sector.

There are legal opinions in Canada and Quebec which go into this in much detail. In a hazelnut shell, CETA would forbid the City of Hamilton from applying offsets, or conditions designed to extract local development benefits, on tenders for goods, services and construction over certain thresholds.

No Buy Canadian Policies

CETA would flat-out ban "Buy Canadian" policies, which will deprive cities of a seldom used but effective job-creating tool.

The City of Toronto, for example, buys subway cars from a plant in Sudbury because it creates enormous spinoff economic activity and jobs across the GTA. Our city may one day like to make a similar policy for its light rail vehicles. It wouldn't be able to if the city were bound by CETA.

The EU deal would also outlaw requirements for firms to source a portion of their inputs locally, or hire local workers.

A separate services chapter may contain so-called Mode 4 rights for corporations to bring their own labour, including top management, into the country temporarily to satisfy contracts won by EU firms. But this part of the negotiations is not as advanced as the procurement chapter.

The thresholds that Canada and the EU have tentatively agreed on for government contracts are $300,000 for goods and services, and $8 million for construction. The Harper government, and now the Association of Municipalities of Ontario, stress that the bulk of municipal tenders fall below those values.

But according to officials at the Ontario Ministry of Economic Development, 80 percent of the value of provincial procurement will be covered by the restrictions proposed by the EU.

Promoting Social Goals

The potential to maximize the social value of spending public money by using procurement for other social goals - namely employment or training goals, but also sustainable or green development strategies, buy local food programs, and so on - would vanish as options on exactly those projects where they would count the most.

The justification for giving up these spending prerogatives is that it will make public spending by all levels of government more transparent and fair. Proponents of CETA claim the benefit to cities like Hamilton will be greater choice of contractors at a lower price.

These are worthy goals but the problem is exaggerated. European firms already bid on and win Canadian contracts, and vice versa. What the EU is seeking in CETA is a legal guarantee that if one of its firms puts in the lowest bid, that firm will win the contract.

Municipal decisions to the contrary could be challenged before trade tribunals with the authority to halt projects, hand out fines and potentially overturn contracts.

Hamilton's procurement practices are already fair and transparent, and there are more ways to measure taxpayer value than by the bottom line cost. In the United States, for example, many states and municipalities go with an in-state option on contracts even if it costs 10 percent more than the lowest bidder, as long as the local company meets all the other technical requirements.

It's not difficult to imagine a situation in Hamilton where the city might want all the steel in a local construction project be sourced from Ontario mills.

Local Food Policies

It's easier still to imagine buy local food policies at all public facilities, including hospitals. But of course if the contracts run over the threshold for goods or services, good luck trying to force catering and other food service firms from abiding by reasonable local content quotas.

Under CETA, there is no obligation for corporations to do so, and even legal procedures they can invoke if anyone tries.

I am not advocating that Hamilton should always buy locally. I offer some of these examples to demonstrate that procurement policy could apply local employment and manufacturing preferences in a completely transparent and up-front way.

If this made sense in Hamilton only occasionally, you would like to know you had the option to pursue it. CETA takes away that option.

Small Payoff

So we sell more potatoes into the European market. Maybe more pork and beef, possibly more fish, and almost certainly more raw resources as EU firms profit from new investment protections in CETA to increase their share of Canada's vast mineral deposits.

The payoff must be enormous to justify taking away the tools municipalities will need to grow in more socially and environmentally sustainable ways.

Unfortunately, as alluded to above, we're talking about very small sums of money. The federal government continues to claim that CETA will add $12 billion, or 0.77 per cent of GDP to the Canadian economy, phased in over time, based on numbers crunched by European economists prior to the financial meltdown.

But since those numbers came out in 2008, an official sustainability impact assessment of CETA done for the European Commission by a private firm and released this August has predicted gains to Canada of between one quarter and one half of that value.

That drops the value of CETA to Canada to between $3 and $6 billion - not much at all, and possibly still too high according to an independent assessment by CAW economist Jim Stanford, which predicts net job losses from CETA. It is part of the reason North American auto firms are skeptical of the deal.

The same impact assessment for the EU Commission predicts one-sided gains for European construction and service firms from opening Canada's procurement market. It recommends against including an investor-state dispute process as exists in NAFTA, and which is used increasingly by foreign firms to extract penalties from the federal government for provincial actions that go against their interests.

Investment Protections

We've got a case brewing in Flamborough where St Mary's Cement has filed a $275-million NAFTA lawsuit against Canada because the Ontario government blocked a planned quarry in the region.

St Mary's used to be Canadian. Had it still been, it would have had to go through the courts to make its case it had been wronged by public decision makers. But as a Brazilian firm registered in the U.S., it can abuse the NAFTA process to try to extract what investors call "indirect expropriation" - the money they could have made from any project had the project not been stopped.

It doesn't matter that the quarry was stopped to protect water and farmland. Whether the public decision was legal or not under the rules of investment agreements is now in the hands of a closed-door trade panel somewhere in Washington or elsewhere.

Water

There's another reason Hamilton residents should be opposing the inclusion of such overwhelming investment protections in CETA: water. The rights would extend to private water firms if, as suspected, the Ontario government agrees to commit drinking water and sanitation in its offer to the EU.

After Hamilton awarded a contract to Philips Utilities Management Corporation for water and wastewater treatment, the community faced ten years of environmental disasters and financial upheaval.

The workforce was cut in half within eighteen months, millions of litres of raw sewage spilled into the Hamilton Harbour, homes were flooded and major additional costs were incurred. Numerous charges over years were laid by the Ontario Ministry of the Environment against the contractor for not meeting effluent standards.

The private water contract changed corporate hands four times. In 2004, City Council ended its experiment with privatization and brought operation of its water and wastewater systems back in-house.

Had CETA been in place at the time, Hamilton could have faced an investment dispute by the private water firm - even if that firm was based in the United States and not the EU.

Under the Most Favoured Nation rules of NAFTA and most bilateral free trade deals, services and investment protections extended to one trading partner must be automatically extended to all others.

Intellectual Property for Pharmaceuticals

There are other issues to consider in the CETA negotiations which have little to do with trade as most of us understand it. For example, drug reforms demanded by the EU in the intellectual property chapter would increase the cost of public employee drug plans by almost $3 billion per year across Canada.

The cost to Ontario alone would be over $1.2 billion.

It's unsustainable but according to business groups close to the negotiations, the EU will not sign a deal without these reforms.

Privatization of Public Services

Services commitments in areas such as transit, energy and drinking water will exert pressure on municipalities to treat private bidders for essential services the same as the public sector.

Repetition of the free trade mantra has rendered the negotiating process meaningless for most people.

We've lost sight of how little "free trade" has to do with trade at all - how these agreements were always about a specific type of economic governance that purposely undermines democracy and empowers already powerful multinational firms.

The goal of free trade is export-oriented growth with as few barriers to capital and investment flows as possible. There are no jobs in CETA. There are only reduced options for communities like Hamilton.

Opening the Door

The proposed agreement with the EU does, however, give us a chance to open the door a little onto this reality. In Hamilton, where CETA would have significant impacts on our social economy and democracy, we need to swing the door wide open.

I recently presented to city council about CETA's impacts on municipalities. It was the first most councillors and even city managers had heard about the negotiations.

The Harper government has said it is consulting heavily with Canadians and municipalities in particular. Clearly someone's not telling the truth.

If you'd like to get involved in the local struggle against CETA, I encourage you to attend a meeting of the new Hamilton chapter of the Council of Canadians this Wednesday, October 18 at the Sky Dragon on King William Street.

It won't be all CETA - this is a meeting to talk about what kinds of issues a local chapter could focus on over the next few months. But there is a good chance CETA will be one of them.

If you want to take more immediate action, there are several actions, including letters to MPs, provincial legislators and city councillors that you can fire off directly from www.canadians.org/trade.

There's no reason we can't stop CETA if enough people speak up.

Stuart Trew is the Trade campaigner for the Council of Canadians. He lives in Hamilton.

8 Comments

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By Zozo (registered) | Posted October 17, 2011 at 15:26:43

This will definitely be a threat to medium and large businesses, and anything in the manufacturing industry. However, given the level of government this is being issued from, and the fact that Ontario gave Mr. Harper his Federal Majority, this is going to happen. I think this will just speed up what is already happening; the dismantling of our traditional manufacturing industry. But, we must always seek the silver lining and opportunity that are presented when the mighty economic titans throw around their weight. Like the tiny mammals awaiting the preverbal asteroid, small business will emerge to claim its place in the Canadian economy. If our projections of the future are even slightly accurate, we will experience a mass migration of labour intensive jobs and related industries. The future will be small business. Any “Free Trade” agreement will be enforced against larger firms and those trading in vast crazily large dollars. The Micro and Small businesses will multiply and thrive, keeping things local, forcing the shift from a consumer economy to an investment one. Where more and more people will learn the true value and worth of money; where the individual will unlock their passion and make a living out of sharing that passion with likeminded souls; where making connections will be prized over making profits. No trade agreement can stop what is already building, in fact only the opposite is true. Globalization will destroy and deport the economies of yesterday, and from the ashes our true north, strong and free entrepreneurial spirit will take root and form something no treaty can take away. The first step in to learn what money is, and why it is such a useful tool. When we do this, we will stop spending needlessly on cheap crap made from afar, and begin investing in things we truly need and care about. We will stop watching endless hours of mind-numbing television, and start spending our energy in the communities we live. We will stop buying things we will only use twice a year and start creating systems where we borrow things when we need them. We will stop being victims and start taking control of our own destinies. This is not a pipe dream. It will be the natural response of an intelligent, creative and self determined people whose purpose shall become the governance of their own lives and communities, into the core of their very being.

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By RB (registered) | Posted October 18, 2011 at 08:27:09 in reply to Comment 70617

Do you work for CETA?

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By the truth (anonymous) | Posted October 17, 2011 at 19:26:02

I went to this presentation and all I know is that it is bad from a number of reasons. People can no longer just sit on their butts, they must be engaged in this fight.

It is now time to fight against the multinational corporations, who have to much access to our elected officials, who decided that they were the boss anyways!




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By Undustrial (registered) - website | Posted October 18, 2011 at 03:02:55

The European Union? Good luck with that....

Please tell me I'm not the only one who reads the business pages...

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By Zozo (registered) | Posted October 18, 2011 at 09:29:25

You cannot fight what years of complacency and passive consent have built. You can only circumvent it. We need to fight the system by not becoming the system. We need to de-institutionalize and decentralize our economy. All institutions, no matter how well intended or good natured, are ultimately out to serve itself. Meaning self preservation and the need for the institution are fundamental over any other issue. We need to master collaboration and loosely tied alliances focused on goals not agendas. We need masses of such collaborations that work together in and for their communities, while contributing to the great whole. This will come when business reaches its next evolution, not to profit and exploit, but to prosper and create.

We are living in a time when the weight of the mighty Industrial Revolution Behemoth is about to surrender to the physics of gravity, suffocating itself in its own short-term bulk. When this happens, we can either role over and take the ‘depression’ that will come until someone else comes along and breeds another beast in a few decades, or we can begin to learn now how to take our economy into our own hands. We have accepted the system that is as the only way, we reassure ourselves we live in a democracy. We kid ourselves into thinking that the problem we face with poverty, crime, social injustice and swindling are just in our city, when in fact all cities in the entire world face the exact same problems. We have allowed ourselves to become disconnected from one another and from humanities most useful tool; Economy. Our current system is broken; every city is facing the same problems, because every city is designed with the same social, political and economic flaws. That shall be our GREATEST strength; If all cities are designed the same way, all designed to filter wealth up and keep people down, we need only begin taking our destinies into our hands. We need only begin learning, collaborating and sharing our successes and failures. When one group figures something out, it will cascade to others. We shall turn the broken cities imposed on us, against the very institutions they were designed to serve…

Individuals taking and making a living out of their passions is the key. Small business will lead us out of this...

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By Undustrial (registered) - website | Posted October 18, 2011 at 11:52:19 in reply to Comment 70648

Awesome post.

Capitalism is on the rocks. I can't say that it will collapse, but it certainly looks that way, even to many in the financial world. One look at the European Union will show that, as well as giving a perfect example of why integrating rich and poor countries is flawed from the outset. The potential default of Greece, Italy, Spain or Portugal now threatens every bank in Europe, if not every bank on the planet.

We need an economy that works a little more like the internet, and a lot less like major television networks.

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By mystoneycreek (registered) - website | Posted October 18, 2011 at 17:18:20 in reply to Comment 70653

We need an economy that works a little more like the internet, and a lot less like major television networks.

Beautiful!

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By BobInnes (registered) - website | Posted October 23, 2011 at 01:08:40

Thanks for this analysis. I hadn't been following CETA much till I watched British PM Cameron addressing Parliament on CPAC. Determined. Scary. Having so many jobs dependent on NAFTA, including some family I'm nervous about turning away from free trade and risking the dreaded protectionism. Nonetheless with some trepidation I decided to represent the Canadian Action Party which opposes NAFTA and CETA on the basis that things have gone too far and too undemocratic. Maybe the new Occupation movement will help Canadians understand what is really going on so we can all put shoulder to wheel to stop any more unhealthy devolvement.

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