The huge crowds of protesters outside World Trade Organization conferences are not difficult to explain. The WTO’s somewhat obscure mandate can make it seem slightly sinister, and the organization hasn’t done the best possible job of explaining itself to the world at large. All things considered, it’s not too surprising that some people have come to imagine the WTO as part of some evil globalization cabal, so dangerous that it’s worth travelling long distances to throw bricks at police officers over. Chapter 11 of NAFTA, under which the Ethyl Corporation recently successfully sued the Canadian government, is often perceived as belonging to the same international conspiracy.
What precisely do these bodies do? Can they ever work in our favour? One case worth considering is the ongoing softwood lumber dispute between Canada and the United States. The export of Canadian lumber products to the States was worth $10 billion and hundreds of thousands of jobs in Canada last year. Canada supplies about a third of American demand, much to the chagrin of the American forestry companies who have difficulty competing with our exports. But why should the Americans bother competing when they can get their government to protect them instead?
Thus was born the Coalition for Fair Lumber Imports, a group of American forestry companies headed by aptly named lobbyist Rusty Wood. They headed to Washington to hit the lobbying circuit, armed with expense accounts for lunches with senators and a questionable argument to the effect that Canada was illegally subsidizing lumber exports. Soon enough, duties totaling 32 per cent were slapped on Canadian lumber imports, effectively pricing the Canadian product out of the market and throwing 20,000 Canadians out of work. Canada rejects the association’s charge and has firmly protested the tariff, but it seems impossible to penetrate this closed power system through diplomatic means.
Enter the World Trade Organization. Trade Minister Pierre Pettigrew has submitted the case to the WTO’s dispute settlement process, claiming that the American import duty is an unfair tariff. The WTO offers an independent, judicial resolution to trade disputes such as the lumber issue, including the right to appeal and an enforcement mechanism.
While not yet able to ensure total compliance with its decisions, the WTO’s voice is respected nonetheless as a neutral third party. If Canada is a mouse in bed with the American elephant, isn’t it in our interests to have a set of independent rules about who can roll over when? The alternative is entrusting our economy to Washington lawmakers who will decide these issues over three-martini lunches and rounds of golf with representatives of American forestry companies.
The problem is that when it comes to protectionism, Canada gives as good as it gets. Recall the Brazilian beef ban fiasco of last February. Claiming a risk that Brazilian beef was infested with BSE (“mad cow disease”), the federal government banned all beef imports, casting a pallor on the international reputation of Brazilian agriculture. However, it soon emerged that there was nothing wrong with Brazilian cows, and that the ban had more to do with airplanes than with cattle.
Canada’s Bombardier and Brazil’s Embraer are bitter rivals in the airplane industry. The Brazilian and Canadian governments have employed a succession of protectionist schemes and millions of taxpayer dollars to help their respective companies sell airplanes. The WTO has issued several judgments against these practices, but both sides continue to violate the spirit if not the letter of the rulings. Seizing on the opportunity offered by international paranoia over BSE, the Canadian government decided to hit Brazil where it would hurt.
This is called a trade war, and it’s the inevitable result of letting governments establish international trade policy unilaterally. We should be very clear on who pays the price for giving governments this power. Firstly, the Brazilian cattle ranchers who depend on exports for their livelihoods—they could probably share some hard luck stories with BC loggers. Secondly, you, me and the rest of the taxpayers of Canada and Brazil, whose money is used to fight dirty trade wars on behalf of companies like Bombardier and Embraer. Thirdly, anyone who buys beef or any other products whose prices are driven up by trade wars.
That the ban lasted for less than a month is a credit to the courage of the individuals who revealed the plot, but also to the fact that we have finally started to recognize that national governments cannot always be trusted to do the right things for the right reasons in matters of international trade. The WTO has unfortunately not been given enough authority to settle disputes before they reach the level that this almost did, but its decisions have provided a crucial objective guideline.
This brings us to the Ethyl case, in which a suit was brought against the Canadian federal government under Chapter 11 of NAFTA, obliging it to revoke its ban on the importation of fuel-additive MMT. Unquestionably, the safety of citizens is a legitimate ground for restricting the trade and production of dangerous substances. Chapter 11 is intended not to sacrifice this well-being to the interests of corporations, but to ensure that national governments do not use bogus safety concerns to discriminate between companies based on their national origin. The reason why the MMT case was the first to be filed against Canada under Chapter 11 is because, like most safety and environmental regulations, the ban on MMT was based not on science but on insider politics and protectionism.
In 1994, when Health Canada scientists evaluated MMT, they concluded unambiguously that “the combustion products of MMT in gasoline do not represent an added health risk to the Canadian population.” A 1997 Senate Committee investigation was also unable to find conclusive health risks. The evidence against the substance came overwhelmingly from automobile industry representatives, who claimed that MMT disrupted the functioning of their engines. This is a questionable claim, but it’s easy to reconstruct the government’s reasoning in accepting the argument.
Ethyl Corp., an American company, is the sole manufacturer of MMT. The automobile industry is hugely important in Canada, and its representatives carry corresponding weight in Ottawa. Moreover, were MMT to be banned, competing fuel additives manufactured in Canada would gain an obvious advantage. So the government, not surprisingly, went ahead and banned it. Justice ultimately prevailed only because of the prescient inclusion in NAFTA of a judicial oversight for unilateral, protectionist import bans such as this one.
The WTO, Chapter 11 of NAFTA, and the rest of the international rule-based trading system act as safeguards of the economic well-being of citizens from narrow protectionist interests in Washington and Ottawa, and from our own often capricious politicians. We live in an economically interdependent world, in which export industries are fundamental to our economic well-being. Just as our society needs laws governing how individuals can behave toward each other, we need international laws governing how states set trade policy. International trade is about more than just capital and corporations, it’s about real people with real jobs. Ask a Brazilian cattle rancher or a BC lumberjack if you don’t believe me.
Photograph by Simon Turnbull
