As Canadian civil society organizations, we hereby call upon Canada’s political leaders during this general election campaign to respond clearly and unequivocally to US presidential candidate Barack Obama’s challenge to renegotiate the North American Free Trade Agreement (NAFTA). While some of Canada’s leaders have spoken out for and against renegotiation, it’s high time that all federal political parties declared their positions and plans concerning the renegotiation of NAFTA within the current election campaign.
Senator Obama issued this challenge during the US primary race, declaring that NAFTA is not functioning well for the majority of working people and the environment in the US. As a result, the platform of the Democratic party convention promises “to work with Canada and Mexico to amend the North American Free Trade Agreement so that it works for all three” countries.
For Canada, there are plenty of good reasons for renegotiating NAFTA after almost 15 years. Chief among them is the energy chapter which includes the “proportionality clause” that compels Canada to continue exporting this country’s oil and natural gas resources to the United States, even if these exports result in domestic shortages here at home.
Canada has less than 13 years of conventional oil reserves and only 8.9 years of natural gas supplies available at current rates of production. Any decision by a Canadian province or federal government to cut back on oil and gas exports for the sake of conservation, greenhouse gas emission reductions, the creation of jobs in the petrochemical industry or diversion of petroleum to eastern provinces could be forbidden by NAFTA’s proportional sharing obligations.
The proportionality clause would compel Canada to continue its oil and natural gas sales to the US at the same rate as they were exported over the previous three years. Currently this means that Canada would be obliged to make two-thirds of our domestic oil production and 63% of our natural gas production available for export to the U.S.
Not only is Canada’s energy security at risk, but so are this country’s freshwater resources. Today, there are rapidly growing water shortages emerging in the Southwest, Midwest, and Southeast states of the US. By 2015, almost a quarter of America’s medium sized cities and nearly one-fifth of its largest cities are expected to be facing serious water shortages. If one or more Canadian provinces turn on the tap to export freshwater to the US, the proportionality clause will automatically be activated, guaranteeing a continuous, uninterrupted flow.
Moreover, NAFTA’s investment chapter gives corporations the right to sue governments in all three countries for alleged violation of these rules through unelected trade tribunals, thereby giving them the powers to ratchet down unwanted policies and regulations adopted by democratically elected legislatures. Since NAFTA was signed, corporations have used NAFTA Chapter 11 in over 50 cases, demanding hundreds millions of dollars in public money as compensation for lost profits. Through this mechanism, corporations have successfully challenged federal bans on toxic gasoline additives and the export of hazardous wastes, while posing a threat to British Columbia’s ban on bulk water exports. Indeed, the number of claims continues to grow, including challenges against Newfoundland’s local economic development policies, by multinational oil giant Exxon-Mobil. In short, NAFTA's investment rules need to be renegotiated to eliminate this deeply flawed dispute process.
Finally, we maintain along with our allies in the US and Mexico that trade regimes like NAFTA must be designed to protect workers and the environment. As it stands now, NAFTA functions in such a way as to foster a race to the bottom for both workers and the environment in all three countries. In the current economic crisis, these flaws in NAFTA will only serve to further depress wages and cause the loss of more good jobs, while undermining both workers rights and environmental sustainability.
The time has come, therefore, for Canada’s political leaders to step up to the plate by putting forward a platform for the renegotiation of NAFTA. If these negotiations fail, then Canada has the option to “use the hammer of a potential opt-out” and withdraw from NAFTA altogether. If such renegotiation does succeed, it could lay the basis for a genuine North American development pact to foster energy security and environmental sustainability in all three countries.
Organizational Sign-Ons:
Canadian Centre for Policy Alternatives
Canadian Labor Congress
Canadian Union of Postal Workers
Communication, Energy and Paperworkers
Council of Canadians
Le collectif national stop au methanier
KAIROS --- Canadian Ecumenical Justice Initiatives
Parkland Institute
Polaris Institute
Rideau Institute
Background Information
NAFTA’s proportionality clause occurs first in Chapter Three on Market Access for Goods (Article 315) and again in Chapter Six on Energy (Article 605). The clause says that if any Canadian jurisdiction were to take measures that reduced the availability of a good, such as oil or natural gas, for export to the United States, Canada would still be obliged to make available for sale the same proportion of the total supply of that good that was sold to the U.S. over the most recent 36 month period for which data is available. Total supply is defined as including production, imports and drawdowns from domestic inventory.
Over the last three years, 2005-2007, the share of the total supply of Canadian crude oil exported to the U.S. was 48.8%. For natural gas the portion exported was 51.7%. These sales were equivalent to 64.9% of Canadian oil production and 62.5% of gas production.
Some examples of policies that would be frustrated by NAFTA’s proportionality requirements include measures: a) to conserve petroleum supplies for future generations of Canadians; b) to limit tar sands production in order to reduce greenhouse gas emissions; c) to set aside natural gas supplies for higher value-added, job-creating petrochemical production; or d) to divert petroleum supplies to eastern provinces that now depend on imports. Eastern Canadians are currently over dependent on imported oil, almost half of which comes from OPEC countries. Quebec relies on imports for 92% of its needs. Atlantic Canada imports 75% of its oil from offshore and Ontario 37%.
If Canada ever allowed exports of bulk water to the United States, the proportionality provisions of Article 315 would apply.
The investor-state provisions in the Investment Chapter (Articles 1115 to 1138) allow corporations to sue NAFTA member governments to seek redress for measures they deem unfair limitations on their ability to do business without state interference. Among other cases corporations have challenged Ontario’s decision to halt a project to dispose of Toronto’s garbage in a northern Ontario mine; a federal environmental assessment that stopped a controversial mega-quarry in Nova Scotia, and, most recently, the first NAFTA claim against policies restricting the growth of private, for-profit health care.