Why 38 Ontario municipalities oppose the Canada – EU trade deal

November 9, 2012

To date, 38 municipalities have passed motions expressing concern about the closed door negotiations for a comprehensive economic and trade agreement (CETA) going on between the EU and Canada. 

The municipalities of Alnwick/Haldimand, Asphodel-Norwood, Cambridge, Brant, Essex, Drummond/North Elmsley, French River, Hamilton, London, Mississauga, Trent Hills, New Tecumseth, Niagara Falls, Stratford, Oshawa, Pelee, Thorold, Thunder Bay, Toronto, Welland and Wellesley are calling on the province to negotiate a permanent exemption for local governments from CETA. 

The municipalities of  Amherstburg, Barrie, Brampton, Brantford, Brockville, Caledon, Ingersoll, Kingston, Kitchener, Oakville, Ottawa, Peterborough, Quinte West, Region of Waterloo, South Frontenac, Waterloo and Windsor are calling for greater transparency and accountability in the negotiations. 

A close look at what is being negotiated reveals the concerns are warranted. 

Previous trade agreements, such as NAFTA, focused mainly on the activities of the federal government.  CETA goes further to include the activities of provincial and municipal governments and crown corporations. 

It could impact public services, regulations and local decision-making. 

For starters, CETA could curtail government policies that promote local industrial development and “buy local/Ontario” initiatives.  In Ontario, purchases by all levels of government amount to $60-$90 billion annually, providing considerable clout to support local economies.  Under existing free trade agreements, public expenditure is one of the few remaining policy tools provincial and municipal governments can use to directly support domestic economic development, increase productivity, promote environmental policies and support disadvantaged communities.  Provincial and local governments have, for example, supported the creation of manufacturing jobs through policies requiring that public transit equipment purchases must have at least 25 per cent Canadian content. CETA would restrict the ability of municipalities to stipulate that local suppliers must be used or that local jobs must be provided. 

CETA could also limit other policy options for governments.  For example, local governments may be tempted to try to resolve their fiscal difficulties through some form of privatization of services.  In the context of CETA, these experiments could have unintended long-term consequences.  CETA would make it more difficult to bring a service back under public control in the case of a failed privatization, such as occurred with  Hamilton’s waterworks and sewage treatment. 

CETA negotiators are proposing dispute resolution mechanisms that would enable foreign investors to sue municipal governments for potential profit losses related to government policies and regulations.  Investor claims are considered and decisions rendered by unaccountable tribunals operating outside of national legal systems.  Under NAFTA, dozens of actions have already been launched by foreign corporations against federal government policies, costing the federal government more than $157 million.  CETA could expand the jurisdiction of these tribunals to include claims from European investors.

Virtually any policy measure that negatively affects the projected profitability of a foreign corporation operating in Canada could be defined as “expropriation” or unfair treatment.  This could include environmental protection legislation. 

Worse, this undemocratic mechanism results in a chill effect on government policy development: Municipal governments would have to consider whether a new policy could result in expensive legal costs and risky corporate litigation.

The province’s manufacturing sector continues to struggle following the loss of 300,000 jobs over the past decade.  CETA’s removal of tariffs would disproportionately benefit EU manufacturers and, when taken in conjunction with the rising dollar, could contribute to 70,000 more lost jobs. 

CETA also locks Ontario-EU trade into its current imbalanced trade pattern. It could box Ontario into exporting non-renewable resources such as gold, nickel and uranium, privileging EU’s current exports of sophisticated value-added products, such as medications and motor vehicles, to Ontario.

Finally, the extended patent rights for pharmaceutical drugs being called for by the EU could increase drug costs in Ontario by $1.2 billion annually.

Municipal governments in Ontario are justified in their concern. They’re right to call for greater transparency and accountability in CETA negotiations.  The deal that’s being proposed would tie the hands of provincial and municipal governments in unprecedented ways.

John Jacobs is the author of “Straightjacket: CETA’s Constraining Effects on Ontario” published by the Ontario office of the Canadian Centre for Policy Alternatives (CCPA).