International Trade Regulation, Economics, Water, And The Environment

Without vision the people perish

International Trade Regulation, Economics, Water, and the Environment. April 2000 West Coast Environmental Law, Water Export Controls and Canadian International Trade Obligations, 17 August 1999. Introduction At issue in the West Coast legal opinion are competing values between capitalism and environmentalism and the power to promote or deny these values as concerns bulk water exports. This essay will attempt to outline the various issues brought forward by West Coast Environmental Law legal opinion and the implications of Canadian trade obligations under the NAFTA and the WTO. In order to do this however, the paper will begin with a

brief

current decisions

outline economic and

of

economic

theories

free

trade,

history,

that as

tracing

influence

well

as

the

trade

root

of

regulation

alternative

economic

milestones ignored by the WTO including a Canadian economic perspective. This paper will eventually seek to view WTO trade policies within a broader framework that includes environmental principles as demonstrated by our legal and political systems. Part I : Economic Theory and International Economic Policy It is only by understanding the limitations of economic theories that they become useful. Economic theories are often declared and viewed as uncertain, and amorphous. Generally they

1

are accompanied by the warning that in practice theory should be

applied

in

a

contextually

limited

manner

taking

into

consideration other competing models and values. International economic policy is influenced by pragmatic considerations

and

a

bit

of

economic

theory.

Pragmatic

considerations which benefit specific groups are probably more indicative as to the rational for the current global economic climate than any theory used to justify the trading regime. However, economic theory is used as a building block to justify international

trade

obligations

and

should

therefore

be

examined on its merits, even though an analysis of benefits might be more revealing. The first premise that underlies international policy is the idea that it is desirable to have international trade. It is difficult to disagree with this proposition. Underlying this desire is the motivation for material advantage and benefit. The statement assumes that international trade is beneficial, and so long as it is, the material advantage does provide a motivation

for

trade.

I

can

only

think

of

two

peace-time

scenario's where international trade would not be desirable. First, if one party did not actually benefit, either at the time of each exchange or over the entire duration of the trade, calculating the full social costs and benefits involved. This would create a situation where either neither party benefits, or one party benefits at the expense the other, such as occurs under many colonial relationships. primarily

self-sufficient

or

Second, if the nation was

religious

to

the

degree

that

materially advantage was no longer a prime motivation. Neither of these considerations are relevant to Canada.

2

The second premise that underlies international policy is the idea that interference with trade and the resulting effects should

be

avoided.

The

proposition

is

not

self-evident.

It

assumes that any benefit caused by intervention is outweighed by net negative effects. This may or may not be true, as is particular to the trade distortion. The effects of interference can vary from creating higher prices, to increasing wages, to improving

our

environment,

to

extra

costs

related

to

non-

define,

are

not

proportional retribution. Overall,

the

effects

remain

hard

to

restricted to monetary evaluations, and are beyond the ability of most statisticians to measure or forsee. It is obviously possible for intervention to benefit trade, much of the GATT limits the ability of nations to intervene in a beneficial way within

their

region,

under

the

rational

of

avoiding

trade

retribution. Another reason used to avoid interference is that lower costs

of

production

benefit

the

consumer.

Of

course,

this

assumes that pricing is the result of supply and demand and that products are priced relative to their cost, passing the benefit

the

consumer,

which

is

mostly

artificial

posturing.

Lower costs do not always benefit the consumer, sometimes they provide the incentive for cutting corners on quality. It is producers

who

benefit

most

from

a

low

cost

of

production,

usually at the expense of labour. Less to the point, this statement also assumes that trade exists a priori interference, suggesting that free trade is part of the natural law of the world. It is basically premised on

the

idea

that

trade

can

exist

without

interference. 3

Realistically,

regulation

should

be

viewed

as

the

starting

point for trade and the building blocks from which fair trade and free markets develop. Without intervention, the markets may not exist, and fair trade might not take place at all. Absolute Advantage If one region can produce a commodity with less expense than another, and they exchange, then both should benefit. In a nutshell, this is the law of comparative advantage. It is used as the justification for WTO trade regulations. Some

land

grows

corn

better

than

other

land.

This

economical insight into farming in early 18th Century was the cornerstone of the law of absolute advantage. Some farmland will yield more corn per acre than another, therefore the good land

confers

an

absolute

advantage

over

other

regions.

The

conclusion drawn from this argument is that the farmer of the poor land should change products that it can produce to its absolute advantage, such as grazing sheep. The law of absolute advantage is based on the assumption that competition is the best paradigm within which to build an economy, it assumes that competition will improve production. The problem with the use of this paradigm is that it creates winners and losers. In every competition someone is excluded. That the farmer of the poor land should go raise sheep is not self-evident. motivation

This

for

conclusion

profit

as

the

requires raison

a

firm

d'etre

faith of

in

the

people

and

nations. It also follows that the net negative effects of the sheep farmer do not outweigh the benefits gained by that farmer or others in the region, or nation. Such may not be true. 4

Competition is often used as an ideology to justify capitalism and

the

free

market.

Markets

however,

are

primarily

co-

operative endeavours. Except for Darwinian battles of life and death, every competitive endeavour is established by first cooperating, setting rules, and agreeing to compete. Co-operative markets allow for competition, not the other way around. To this end, competition should never be seen as a natural law, but merely as a by-product of co-operation, an agreed upon behaviour. Comparative Advantage Comparative

advantage

developed

from

ideas

generated

around the "labour theory of value" in economic debate by David Ricardo. Ricardo was operating under the assumption that the value of any given product was to be derived from the total of its labour content. In a more complex society, we recognize the additional costs of land and capital involved in the evaluation of a good. The law

advantage1 posits

of comparative

that within

a

country, a region will produce goods it can make cheaper than other regions. That the value of a commodity within a country is determined by its labour, land, and capital content. During the production life of a good, the supply will expand until the price is levelled down to the total value of the labour, land, and capital that it contains. Therefore a country should export the

product

in

which

it

has

the

greater

advantage,

or

comparative advantage, and import the commodity in which its advantage

is

disadvantage. 1

less, Even

or when

in one

which

it

country

has can

a

comparative

produce

both

Jackson, International Economic Relations, Kindleberger, 3rd ed. (West Group) Minn, 1995. P.8.

5

commodities

more

gain

specialization

from

efficiently

efficiency

advantage

commodities

than

and

is

in

than

another

exchange,

greater

others.

country,

both

can

that

the

commodity

or

provided

in

some

International

trade

does

not

require offsetting absolute advantages but is possible where a comparative advantage exists. However, a comparative advantage is always accompanied by a comparative disadvantage. In order for this to be true, the theory of comparative advantage must be restricted to a set of highly artificial and limited

applications.

The

theory

must

assume

efficient

transportation, efficient labour and ready capital. All factors that fluctuate depending on social conditions. It also assumes that the value of a product is the sum of its production costs. The theory requires that full social costs be calculated in a benefits analysis of comparative advantage. difficult

endeavour

requiring

techniques

This is a very to

measure

large

intangibles. Even if the costs were known as to labour, land, and the capital involved, the benefits of a public bus route, phone lines, or transportation systems, plus a thousand other contributions are very difficult to measure. Another theory

is

problem

the

with

limitation

the on

general

sources

of

application value

for

of

this

a

good.

Production costs are not the total cost involved over the life of a good. Products that end up polluting our land and water must be cleaned up, adding to the social cost of having the product. The total value of a good should include production costs and the final distribution costs in order to adequately reflect

the

Distribution

full costs

social can

value

either

be

accruing included

to in

the

the

good.

price

of

delivery, or they can be an added expense after the sale. It is 6

usually not known what the distribution costs of a product will be until it is consumed or used, or finds a last resting place. But so long as the theory of comparative advantage limits the evaluation

of

a

product

to

production

costs

it

will

not

accurately predict which trade in goods result in benefits. Limiting the value of a product to its production costs creates a

false

sense

of

benefit,

if

the

advantage

is

offset

by

distribution costs. Goods can fit into four different categories. Goods can be useful, useless, durable, or disposable. Obviously goods traded that are more useful and more durable are of better advantage than goods that are useless and disposable. Profit can be made on goods of any category, however comparing costs of useless goods to real goods may be misleading as to the actual values and benefits involved. The theory of comparative advantage does not

adequately

useful

than

regardless

of

discriminate others. cheap

between

Trade

in

production

products

totally costs

do

that

useless not

are

more

widgets,

benefit

the

receiving parties. The

law

of

comparative

advantage

should

distinguish

between the production of durable, useful goods over goods that are merely profitable. To be accurate it its claims, the theory of comparative advantage only holds true if the value of the goods traded is of a similar nature. The character of the good should be taken into consideration in any value assessment. Cheap products of useless junk backed up by a great marketing campaigns do not create a comparative advantage of real value, although they do lead to speculative profit making. It would be better to import durable goods than trade them in exchange for non-value

adding,

or

useless

products.

Importation

of

goods 7

that are generally disposable and useless, in the long run will only disadvantage a community. The

current

economic

theory

of

comparative

advantage

really is only valid in a limited set of circumstances. If we are

to

have

economic

theory

help

guide

us

in

trade

policy

decision making we must survey other contributions to economic theory before and after Ricardo. Part II : Economic Theory 1650-1950 Economists from the 19th Century would argue that we should allow growth of trade to occur strictly in the private sector. Economic theory trends suggest otherwise. A condensed history of economic thought will be useful.2 Classical Economics Beginning with the ideas of Adam Smith (An Inquiry into the

Nature

and

Causes

of

the

Wealth

of

Nations,

1750),

including the ideas of David Ricardo, and ending approximately with John Stuart Mill (1850's) the framework was established for classical economics. Mill in particular established the foundation for free trade

in

which

had

advocating the

individual

effect

of

libertarian

limiting

autonomy

legislative

matters effecting the private economy.

rights

authority

in

In the context of 19th

Century Europe, this argument makes much sense, monopolies had been

granted

to

crown

corporations

for

most

major

state

projects and independent private business moguls were working 2

The following information is from A History of Economic Thought by William Barber, 1967. 8

toward

respectability.

In

the

context

of

our

21st

Century

corporate global climate the argument may validly be reversed. It can be argued that individual rights have the effect of lending legitimacy to legislation over matters effecting the private economy. Overall, the first classical theorists began the analysis of wealth or economic growth by focusing on determinations of economic value based on the agrarian model. Land, capital, and labour were the three categories that created wealth. These relate to value derived from the use of rents, profits, and labour. The Progress of Industrialization The

first

ripple

encounter

by

classical

economics

came

from sources such as Karl Marx, around the 1850's. He focused on the disparity of equality between the various classes and proposed reorganization of the traditional economic model that divided people into landowners, capitalists, or labourers. Marx advocated

the

overthrow

of

the

bourgeois

capitalist

by

the

proletariat labourer, and the confiscation of land under the centralized

control

of

a

Communist

government.

He

also

predicted that capitalism and the wage system would end in revolution because the mass of people, the labourer, would not allow the ownership of resources to be managed by the few, the rich,

once

capitalism

ran

its

course

creating

a

gulf

of

models

of

origins

in

described

as

disparity between the rich and the poor. Anarchist

economic

economic

reorganization.

anarchist

thinking.

theorists Free

Although

proposed

trade

Mill's

has ideas

other its are

9

libertarian,

his

free

trade

ideas

were

anarchist.

Anarcho-

capitalism is the unwaivering extreme view that absolute free trade will promote the benefit of capitalists and trickle down to benefit everyone. Free trade ideas have their origin in the economic work of Pierre Proudhon, the "father of anarchism." Proudhon, 1850's Pierre Proudhon libertarian ideas involved advocating a form of sovereignty association in the guise of decentralized federalism. Anarchism was presented as a pragmatic solution to commerce and trade. Anarchism was to be founded on concrete and practical

solutions

of

organized

society

for

the

mass

of

people, a conscious attempt to avoid abstractions and selfcreated power ideologies. It was proposed that a tariff free environment would allow for individual effort and needs to efficaciously guide the flow of material goods from union owned manufacturing centres to the people.

The

minimal

impairment

of

the

individual

by

the

government was key to a cost effective environment, as least intrusive as possible, while eradicating the govern/governed class difference. He coined the refrain, "Property is theft," and

was

concerned

with

limiting

the

role

of

authority

in

society to the maximum. Proudhon did not advocate an absolute or extreme position but rather warned against utopianism, and absolutism as a kind of thought that fails to distinguish between concrete reality and abstract products of the mind. In The Federal Principle, 1852, Proudon sought to find a realistic pragmatic balance in political life between, 10

"Authority and Liberty, two principles which underlie all forms of organized society, on the one hand contrary to each other, in a perpetual state of conflict, and on the other can neither eliminate each other nor be resolved, some kind of compromise between the two is necessary. Whatever the system favoured, whether it be monarchical, democratic, communist or anarchist, its length of life will depend to the extent to which it has taken the contrary principle into account."

Anarchist

society

is

to

be

achieved

by

reducing,

simplifying, decentralizing and suppressing, one after another, all the wheels of the state. He labelled himself a practical reformer and saw the life of society as perpetual reformation, reform

which

should

go

on

unceasingly.

The

role

of

the

federation was to reserve power for the citizen rather than the state

based

on

free

association

concepts.

Proudhon

was

in

favour of private ownership of small-scale property. He opposed the

corporate

ideal

industries

because

ownership.

Property

democracy

through

of

individual

workers was

would

essential

co-operative

ownership

over

lose

their

to

building

associations,

large

rights

and

a

strong

like

labour

unions, but only as to empower the mass of people, not for the benefit of the bourgeoisie. Although anarchist thought after Proudhon was also used as an absolutist doctrine representing the demand "for every human being the right and means to do whatever pleases him." Proudhon's contribution to history is still reflected in politics represented by comity, free trade, and the federalist movements of today. The Economics of Kropotkin. The Conquest of Bread. Most anarchists rejected capitalism and strove to create a system beyond the free market. Kropotkin claimed that economics should

be

approached

from

the

standpoint

of

consumption--of 11

human needs. The needs of mankind should govern production, and the means of satisfying production should include the least possible

waste

of

human

energy.

According

to

Kropotkin,

personal property should be abolished, the wage system, cash and credit discarded, and to the extent possible, all goods and services

should

be

provided

free

of

charge

to

all.

Goods

available in abundance should be available without limit; those in

short

supply

should

be

rationed.

He

envisions

a

decentralized anarchist economic polity to oversee production and distribution of necessities, in all their variety, not on the basis of position or productivity, but on need in a free and democratic society. Bakunin, 1914. Bakunin

offered

a

critique

of

capitalism,

in

which

authority and economic inequality went hand in hand, and a critique of state socialism, (Marx) which was said to be one sided in its concentration on economic factors while grossly underestimating

the

dangers

of

social

authority.

Marx

was

centralist. Bakunin opposed centralism with federalism. Bakunin

believed

that

representative

democracy,

or

parliamentary democracy, had found a way of gaining legitimacy through the illusion that some how the voters were in charge of running

the

system.

The

reality,

he

posits,

is

that

the

capitalist class is in permanent control. So long as the great mass of the population has to sell its labour power in order to survive,

there

cannot

be

democratic

government.

So

long

as

people are economically exploited by capitalism and there are gross inequalities of wealth, there cannot be real democracy. Economic facts are much stronger than political rights. No one 12

can govern for the people in their interests. Only personal and direct control over our own lives will ensure that justice and freedom will prevail. To abdicate direct control is to deny freedom. under

To

the

grant

mantle

political of

sovereignty

democracy,

to

others,

republicanism,

the

whether people's

state, or whatever, is to give others control and therefore domination over our personal lives.

Anarchism Anarchism is the name given to a principle or theory of life

and

conduct

under

which

society

is

conceived

without

government - harmony in such a society being obtained, not by submission to law, or by obedience to any authority, but by free

agreements

concluded

between

the

various

groups,

territorial and professional, freely constituted for the sake of production and consumption, as also for the satisfaction of the infinite variety of needs and aspirations of a civilized being. As

to

their

economical

conceptions,

the

anarchists,

in

common with all socialists, of who they constitute the left wing,

maintain

that

the

now

prevailing

system

of

private

ownership in land, and our capitalist production for the sake of profits, represent a monopoly which runs against both the principles of justice and the dictates of utility. Capitalists are the main obstacle which prevents the success of modern techniques from being brought into the service of all, so as to produce general well-being. True progress lies in the direction of decentralization, both territorial and functional, in the

13

development of the spirit of local and personal initiative, in a free federation of autonomous sovereign groups. Political expressions

organization

of

individual

ought

and

to

group

be

governed

opinions,

by

not

the

directing

centres which control people. They should balance group rights of self-determination with the freedom to associate or not with larger political bodies, free from coercion. Anarchy is based upon the free federation of participants in order to maximize individual and collective well-being. Self-protection is the only end for which society may legitimately infringe upon the liberty of action of any individual. Power should be exercised to prevent the individual from doing harm to others, but that is

the

only

part

of

conduct

for

which

a

person

should

be

answerable to society. In every other way people should have freedom. In

Canada

decentralized

some

provinces

federalism

or

would

other

like

forms

to of

see

more

sovereignty

association. For example, Free trade zones and the elimination of borders tariffs are the goals of modern investment treaties. The free trade argument is an unconscious use of anarchist thought

as

applied

to

finance

and

the

international

arena,

although it is to benefit a different abstract state creation, the

international

corporation,

rather

than

local

unions.

International law concepts of sovereignty are used as a basis for the relations between states. It is not a coincidence that democratic policy makers make use of free trade arguments and notions of sovereignty, the ideas were proposed as pragmatic solutions that seem to fit our existential reality. Founded in pragmatics, anarchism should not be ignored as a policy source for international trade. 14

Neo-Classical Economics Neo-classical

economics

began

around

the

turn

of

the

century. It provided more analysis on the processes through which

the

market

system

allocates

economic

resources.

The

application of supply and demand curves, micro-economics and price theory helped to calm many of the disquieting aspects that

Marx

had

created

around

classical

economics.

It

accomplished this by ignoring the class division and working from

the

assumption

of

the

existence

of

the

"autonomous"

rational wealth maximizer as subject for study. Alfred Marshall was a professor at Cambridge in the late 1890's. He created the idea that supply and demand can be used to determine a fair price for the exchange of commodities in an industrialized society. These mathematical equilibrium curves assume that people act as rational agents pursuing economic ends. Another assumption required was formulated in Say's Law, which says that all income must be spent. Hoarding was seen as irrational,

and

the

cause

of

a

poor

economic

climate.

The

interaction of rational economic consumers and producers was suppose to create an equilibrium and fair price, so long as rational economic actors sought to maximize wealth. In this environment, market objects gravitate toward optimum value and use, wasting nothing. Government intervention was seen to bear a

heavy

responsibility

for

waste,

inefficiency

and

misallocation of economic resources. The

neo-classical

preoccupation

with

efficiency

in

production and exchange diverted attention from distributional inequality

and

from

divergent

interests

of

various

groups 15

within society, while focusing on the myth of the rational person

as

a

conforming

economic

agent.

Although

Marshall

himself warned against using this fiction as justification or explanation of the reality of economics, (because people made decisions

for

reasons

theorists

since

other

claimed

that

than

maximizing

these

models

wealth)

are

many

mathematical

formulas that actually govern market situations and decisions. The problem with the application of these ideas to real world is

that

they

do

not

validly

consider

other

rational

goals

beyond the accumulation of money. Environmental considerations and a host of other rational concerns not related to money should be included in the idea of a rational actor. Economist

promoted

these

ideas

as

truth

gospel

and

strongly influenced turn-of-the-century America, represented by the wide spread belief in laisse-faire market principles based on individual initiative and reward. Keynesian Economics, General Theory of Employment, Interest and Money, 1932 Keynes represents the next major change in economic theory and his ideas were created between the two world wars. The contribution of Keynes to economic theory re-evaluated laissezfaire capitalism, which was seen as inadequate to the increased problems

of

industrialized

societies.

Government

initiative,

hereforto seen as wasteful, should support and safeguard the economy,

for

example,

with

the

implementation

of

anti-trust

competition law. As well, the theory believes it is prudent to hoard as a hedge against risks of capital loss, in opposition to Say's Law. 16

With these important economic recognition governments had license to move toward creating a variety of schemes aimed at maintaining

market

security

and

predictability.

Keynes

economics acknowledges the market as a construct that does not run itself, but requires government intervention if it is to continue to exist. Governments must intervene to support the market system and correct potentially devastating problems. Keynes

also

advocated

deliberate

government

deficit

spending during conservative times to artificially increase the demand for consumption. The idea is that by spending money on infrastructure, public works, or boondoggling, money spent will trickle

down

the

line

and

benefit

everyone

by

increasing

consumer spending. These ideas are responsible for our current level of debt to G.N.P. ratio. Ironically, a large part of Keynes contribution to economics was the determination of the G.N.P. Canadian Economist Harold Innis3 A Plea for Time, 1951 "In the long run, utility, like everything else, is simply a

figment

of

our

imagination

and

may

well

be

the

fatal

stupidity by which we shall one day perish." Nietzche The

contribution

history

and

theory

recount

how

the

3

is

of

Harlod

quite

history

of

Innis

to

significant. Canada

is

Canadian His

also

economic

earlier

the

works

dynamic

of

Harold Innis, Essays in Canadian Economic History, (University of Toronto Press), 1956 and

Harold Innis, A Plea for Time, The Bias of Communication (University of Toronto Press), 1951 p.75 17

economic advantage. His works call for the general recognition that economic theories and policies should unfold within the context

of

the

existing

local

conditions

prevailing

in

the

place of production. In other words, advantages in production and distribution can only be discerned by viewing production in the context of the local community creating the product over time.

By

understanding

the

whole

context

of

production

and

distribution, policy makers are then able to create appropriate interventions that benefit the market. Innis approached economics from a unique perspective that does not quite fit in with previous economic models. He views regulation of production as promoting either the interests of time or space. Crown monopolies for example were monopolies of time. The conflict between different groups over monopolies of time

hastened

devices

the

intervention

emphasizing

a

rapid

of

the

state.

turnover

of

Unfortunately, goods,

whether

technological, or commercial tend to conflict with long-term investment supported by savings. Competition between consumers' goods with rapid turnover and

durable

goods

implies

conflict

within

an

economy,

and

conflict between nations that emphasize the durable character of goods, such as England, and those emphasizing a less durable character, such as North America. To manage this conflict the state intervenes with policies ranging from the breaking of trusts

to

devices

of

socialism.

In

fields

concerned

with

durable goods and involving long-term investment of capital, such as railways, electric power, forests, and steel, state intervention has been marked. The ultimate steps are taken in a concern

with

long-term

budgets

and

long-term

capital

arrangements and with five-year plans. 18

Overall, a lack of interest in problems of duration in Western

civilization

suggest

that

the

bias

of

paper

and

printing has persisted in a concern with space. The state has been

interested

in

the

enlargement

of

territories

and

the

imposition of cultural uniformity on its peoples, and has lost touch with the problems of time. The state has been willing to engage

in

expense

of

wars

to

long

carry

term

out

immediate

harmony.

As

objectives,

modern

at

developments

the in

communication have made for greater realism they have made for greater possibilities of delusion. Materialism is the auxiliary doctrine of every tyranny, whether of the one or of the masses. The difficulty of handling the concept of time in economic theory and of developing a reconciliation between the static and dynamic economic approach is a reflection of the neglect of the time factor in Western civilization. It is significant the Keynes should have said that in the long run we are all dead and that we have little other interest than that of living for the immediate future. Planning is a word to be used for short periods

-

for

long

periods

it

is

suspect

and

with

it

the

planner. The dilemma has been aptly described, "laissez-faire was planned, planning is not." The results have been evident in the demand for wholesale government activity during periods of intense difficulty. The luxury of the business cycle has been replaced by the concerted measures directed toward the welfare state and full employment. Limited experience with the problem has involved expenditures on a large scale on armaments. Conservation of natural resources, government ownership of railways,

hydro-electric

power,

and

flood

controls

are

illustrations of a growing concern with the problems of time 19

but in the main are the result of acute emergencies of the present.

In

1950,

concern

with

the

position

of

Western

civilization in the year 2000 is unthinkable. An interest in 1984 is only to be found in the satirist or the utopian but not applicable

to

North

America.

Attempts

have

been

made

to

estimate populations at late dates or the reserves of power or mineral resources but always with an emphasis on the resources of

science

procedure, with

and

with

financial

reservations policy,

present-mindedness

or

determined

other

precludes

by

income

expedients.

speculation

in

tax

Obsession terms

of

duration and time. For Innis the preoccupation with space over the interests of time in economic theory is an important oversight, betraying a

preference

for

immediate

gratification

rather

than

wise

fiscal policy. Part III : Further International Trade Policy Tariffs and Quotas A tariff typically raises the price of an imported good because domestic sellers of that good now have an additional cost of production (the tariff) that must be recouped. Domestic producers domestic

gain

a

consumers

competitive pay

advantage

higher

prices

from

the

while

the

tariff

but

government

receives revenue from the tariff. As well, tariff's encourage domestic producers to increase production consuming resources often thought of as better deployed elsewhere. A production subsidy equal in size to the tariff, would yield exactly the same benefits to producers as the tariff.

20

A quota yields no revenue to the government unless the rights

to

import

under

the

quota

are

sold.

Private

entrepreneurs will capture the difference between the price at which imported goods can be bought on world markets and the price in the domestic market resulting from the restriction of import competition. "Quota rent" will be captured by foreign sellers. Everything is the same as a tariff except that what would

be

government

revenue

under

a

tariff

is

captured

by

foreign sellers as a kind of monopoly profit. Quotas

tend

to

conceal

from

the

public

the

degree

of

protection being afforded domestic producers, the price effect of tariffs is more obvious. However, economic planning may be easier if the precise amount of imports can be predicted. Free Trade Free trade is a mantra that has been uttered since early Greek times often as an end in-itself. Free trade or regimes related

to

promoting

free

trade

are

goals

of

current

international treaty obligations. It is natural for countries with low labour costs to specialise in the production of labour intensive goods that do not require a lot of skill to produce. Their trading partners will specialise in goods that are more capital

intensive,

require

more

skilled

labour,

involve

considerable innovation and technical change. Free

trade

is

actually

used

to

entrench

advantage

for

capitalists, at the expense of the other voices within our global community. Free trade establishes de facto control over the means of production by the capitalist class. Only they wield the capital necessary to rent land and hire labour for 21

production. Our laws, regulations and trade regimes all reflect this American bias. The creation of corporations and limited liability sends a message to capitalists that they will not be personally

liable

for

the

actions

of

the

corporations

they

organize. Environmental regimes attempt to discourage polluting behaviour but in general only the assets of the corporation are available if liability requires a remedy. The efficiency argument for free trade is a corollary of the principle that competitive markets, without externalities, are

efficient.

applied

in

This

the

abstract

real

world,

thought

loses

promoting

coherence

corporate

when

predatory

behaviour disguised as survival of the fittest, while immersed in externalities. The best way to respond to free trade is not to abandon industries that another region can produce cheaper. It requires local decision makers to take a good look around and see what resources are present, to understand the history of the region and its communities, to acknowledge the people involved in the industry, and then make an order to determine the production that will benefit the community most, rather than what will benefit the market best. In the context of production and trade the

land

and

corporations, determine

the

people

who

are

local

are

integrated

searching

industry

for

production

together.

cheaper is

a

Allowing

products,

very

to

inefficient

allocation of market resources. In

my

opinion

the

best

economic

actor

is

free

from

decisions based on economic necessity. The best economic actor is a man or a woman who is not forced to work for food, shelter and

clothing,

but

assured

of

survival,

can

choose

what 22

activities will benefit the area most and that also help to provide food, shelter, and clothing. In

Jackson's

International

Economic

Relations,

recent

authors recognize the reality that free trade does not ensure maximum benefit and that intervention can create advantages. The Optimal Tariff4 claims that free trade is not optimal from a national perspective. That there exists an optimal degree of trade intervention, known as the optimal tariff, that works by turning

the

country's

terms

of

trade

in

its

favour.

Each

country has available a policy that will benefit itself at the expense of others, but, if all countries simultaneously pursue that policy, all are likely to lose. This is a more realistic analysis

of

trade

over

free

trade

arguments.

The

analysis

involves the conclusion that tariffs should be reduced to avoid conflict and overall loss. The optimal tariff argument involves a benefit for the intervening country only at the expense of the country's trading partners. The rest of the world loses more than the tariff-levying country gains. In Is Free Trade Passe,5 the author provides a pragmatic analysis of trade which disregards the theory of comparative advantage. In this analysis trade is driven by economies of scale rather than comparative advantage. International markets are

recognized

as

typically

"imperfectly

competitive."

Strategic trade policy is necessary to shift excess returns from

foreign

to

domestic

firms.

A

government

that

commits

itself to subsidizing a product, for example Airbus, can take the

profits

attract

the

of

a

profit

foreign, for

more

local

efficient

producers.

competitor, A

and

government,

by

4

Jackson, International Economic Relations 3rd ed., Alan Deardorff & Robert Stern1987, (West Group) Minn, 1995. P.21. 5 Ibid, Paul Krugman, 1987. p.22.

23

supporting its firms, can raise national welfare at the expense of another country. A protected domestic market can -- under some circumstances-- promote exports and raise national income. However,

interventionist

policies

that

promote

particular

sectors draw resources away from other sectors, and therefore do more harm than good.

Again, in this article economic theory gives way to the reality of pragmatic considerations. The conclusion supports low tariffs by positing that the benefit of subsidies will be outweighed by accompanying losses of other domestic producers who compete for resources. The gain will conceal a loss in overall

national

income.

The

article

also

recognizes

that

governments do not necessarily act in the national interest, especially

when

making

detailed

microeconomic

interventions.

Instead, they are influenced by interest group pressures.

Overall,

beggar-thy-neighbour

interventions

can

raise

national income but will typically raise the welfare of small, fortunate

groups

by

large

amounts,

while

imposing

costs

on

larger, more diffuse groups.

Fair Trade Any significant absolute reduction in real incomes of any significant

section

of

the

community

should

be

avoided.

6

Implicit in this statement is the rejection of the free trade 6

Ibid, Trade Policy and Economic Welfare (1974) Corden, p30. 24

argument that some disadvantaged sectors, such as labour, must necessarily gains

suffer

involved.

In

for

the

terms

overall of

benefit

welfare

of

the

weights,

economic

increases

in

income should be given relatively low weights and decreases very high weights. It is unfair to allow anybody's real income to be reduced significantly. The fact that it is known that a government

will

intervene

unexpected

income

losses

to

prevent

provides

sudden

the

or

large

essential

and

security

necessary for political stability. Policy Choice One of the central ideas of public choice theory is that political include

officials maximizing

pursue

their

chances

of

self-interest, re-election,

which

and

often

maximizing

campaign contributions. Governments will not maximize "social welfare"

in

any

independent

ethical

sense.

The

battle

over

protectionist measures will be fought mainly between competing producer interests. Free trade agreements exist because they are

politically

governments.

beneficial

This

analysis

to

officials suggests

in that

their

signatory

current

trade

regulation is founded on self-interest rather than any economic theory. Environmental Law7 Water is an essential element of life. Communities are often built up around water, without water communities are in a desert. Evidence of environmental deterioration in the forms of harmful pollution, resource depletion, and the decline or even extinction of species is widely apparent. 7

Benedickson, J. Environmental Law. Irwin Law, Canada. 1997. 25

Under

Pennsylvania's

constitution,

"the

people

have

a

right to clean air, pure water, and to the preservation of the natural

scenic,

historic,

and

aesthetic

values

of

the

environment." Public natural resources in the state are "the common property of all the people, including generations yet to come." The state is expected to conserve and maintain these resources for the benefit of all the people in its capacity as trustee. Human rights are generally perceived to involve safeguards from state interference, it is not clear how this applies to environmental

protection.

State

action

appears

to

be

an

essential component of environmental protection, for the right to

a

healthy

collectively

environment or

not

is

at

a

all.

right

that

The

must

adverse

be

enjoyed

effects

of

environmental degradation are frequently gradual, cumulative, and often difficult to link causally to individual victims, sometimes including members of future generations. In Friends of the Oldman River Society v. Canada (Minister of

Transport)

[1992]

1

S.C.R.3.

Justice

La

Forest

of

the

Supreme Court of Canada, "The Constitution Act, 1867 has not assigned the matter of "environment" Parliament.

sui

The

generis

environment,

to as

either

the

understood

provinces in

its

or

generic

sense, encompasses the physical, economic and social enviroment touching

several

of

the

heads

of

power

assigned

to

the

respective levels of government…. It must be recognized that the environment is not an independent matter of legislation under

the

Constitution

Act,

1867

and

that

it

is

a 26

constitutionally abstruse matter which does not comfortably fit within

the

existing

division

of

powers

without

considerable

overlap and uncertainty." In author

"A

Substantive

summarizes

the

Right

to

position

Environmental of

Quality"

environmental

the

regulation

groups, "Those who search for a right to environmental quality hope it will confer more than a right to participate or some requirement

of

due

process

or

natural

justice

before

environmentally harmful decisions are taken. They want a right which

will

dictate

a

decision

in

favour

of

environmental

protection in difficult cases. They hope this right will be equivalent to a civil liberty, on the one hand, constraining government

actions

harmful

to

the

environment,

and,

on

the

other, equivalent to a property right, restraining the use of private

property

in

ways

that

are

incompatible

with

sound

ecological management."8 Part IV : Trade Regulations under GATT and NAFTA The use of trade restrictions designed to force policy changes

in

foreign

countries

has

become

more

common.

Trade

restrictions are viewed as an acceptable alternative to the use of

force.

struggle

The

fundamental

against

each

choice

other

for

is

whether

wealth

and

countries power,

or

will work

together for security and mutual advantage. NAFTA undermines the democratic rights of Canadians to determine the direction of our social and economic and environmental policies. 8

J. Swaigen & R.E. Woods, "A Substantive Right to Environmental Quality" in J. Swaigen, ed.,

Environmental Rights in Canada (Toronto:Butterworths, 1981) 195 at 200. 27

GATT

and

NAFTA

agreements

cover

trade

in

goods

and

services, capital mobility and labour mobility for professional and business groups, and the activity of corporations as well as

the

management

establish

of

regimes

resources.

governing

These

trade

financial,

agreements

transportation,

telecommunications, and agricultural sectors. They introduce an intellectual property code and harmonized standards in areas such as professional qualifications, agricultural inspection, and

health.

continental

NAFTA

codifies,

integration

or

process

entrenches accompanied

in

treaty,

by

changes

a in

national regulation. NAFTA and the WTO has stimulated a major new round of economic integration and restructuring. NAFTA/WTO represents

a

further

shift

in

power

in

favour

of

capital,

reinforcing global conformity, further constraining government policy, and weakening the power of labour and other social groups.

The deregulation of capital (domestic or foreign) allows it to operate throughout an integrated economic space in which investment

tariffs

dismantled

as

and

other

standards

border

become

restrictions

harmonized.

are

being

Corporations

are

able to make decisions about how to organize production and where to add value, where to locate new investment, where to close

down

a

development, supplies,

facility,

advertizing,

and

where

to

where and

to

conduct

accounting,

transfer

research

where

management

and

to

source

and

other

professional personnel on the basis of the profit motive.

28

Pierre

Trudeau

summarized

the

situation

when

he

wrote

"Worse still" (i.e. worse than Meech Lake) "the commendable goal of promoting freer trade has led to a monstrous swindle, under which Canadian government has ceded to the United States of America a large slice of the country's sovereignty over its economy and natural resources in exchange for advantages we already

had,

or

were

going

to

obtain

in

few

through the normal operation of the GATT."

years

anyway

Vital national

powers are protected under the GATT, the same can not be said of NAFTA Bulk Exports of Water The bulk export of Canadian water is a trade issue, and environmental issue, and a human rights issue. It is a debate that

has

all

the

elements

of

a

good

drama.

The

Canadian

government is comprised of the people's representatives who are committed

to

serving

their

constituency

and

promoting

commercial trade in goods and service. The government is bound to

uphold

previous

agreements

while

at

the

same

time

responsible to protect the rights of the people they represent. National

treatment

obligations,

tariff

reduction

commitments

and investor rights, under NAFTA and GATT provide a framework within which bulk water exports may or may not take place. The power

to

decide

the

extent

of

the

Canadian

obligation

is

subject to the potential decision of an international panel. GATT Article XI In the past Panel decisions have given Article XI a broad reading and demonstrate a consistent reluctance to limit or circumscribe

its

application.

This

seems

reasonably

natural 29

because

panel

members

seek

full

implementation

of

their

jurisdiction; they have no incentive to limit their power and do not operate under traditional Canadian judicial restraint. The

dispute

conclusion

resolution of

process

conflicts

as

desires

between

a the

mutually

agreeable

parties

and

are

committed to delivering decisions within their newly created jurisdiction. Article XI of the GATT is designed to eliminate any export control measures not in the form of a tariff. In this way, all export

controls

can

become

subject

to

tariff

reduction

agreements. This is one of the fundamental elements of the GATT, and represents a large move toward member integration and international conformity. It effectively eliminates most if not all other trade restrictive regimes designed for any purpose. It seems the main problem with the subject of water for trade

export

is

not

the

WTO

rules

or

the

NAFTA,

but

the

operation of the two together. Article XI of the GATT provides for "no other restrictions other than duties, taxes or other charge on the exportation or sale for export of any product." It

would

be

difficult

to

craft

water

export

control

measures that would not violate Article XI unless they are tariff based such as the adoption of a high duty, tax, or other charge. Under NAFTA Article 302 Canada is committed to a free trade

zone

that

requires

tariff

elimination.

"No

party

may

increase any existing customs duty, or adopt any customs duty, on an originating good." NAFTA provisions prohibit the use of export

tariffs

that

might,

under

WTO

rules,

have

been

implemented to effectively ban water exports to the U.S.A. In other words, Canada has two sets of obligations, one to the 30

free trade zone, and the other to the other members of the WTO. Canada may adopt high tariff's effectively banning bulk water exports under the WTO rules as relates to countries outside the NAFTA agreement, however, within NAFTA, Canada may not adopt or increase any customs duty tariff. NAFTA does however, allow for quota restrictions, which GATT does not. It may be possible to establish a quota system within the free trade zone and a high tariff barrier beyond to protect Canadian water. Alternatively, a

panel

may

decide

that

Canada

as

concerns

the

U.S.,

is

restricted by the GATT from imposing a quota, and obliged to not raise tariff's under NAFTA, effectively reducing Canadian control over natural resources.

According

to

the

legal

opinion,

the

primary

approach

advocated by federal government is that water in "its natural state"

would

not

be

considered

a

"good"

or

"product."

The

general idea is that unless water has entered into commerce, such

as

in

agriculture,

it

is

not

covered

by

any

trade

agreement including NAFTA. Water in its natural state in lakes, rivers, reservoirs, aquifers, water basins and the like is not a good and is not traded.

Although this does not preclude water in its natural state from being covered by being a service and therefore subject to trade agreements, it does seem an appropriately sufficient and consistent statement as to the parties intentions concerning NAFTA trade obligations. The U.S., however rejects the Canadian approach.

In

order

to

avoid

in-state

and

out-of-state

discrimination, jurisprudence in America considers water in its

31

natural

state

to

be

a

good,

and

so

do

other

international

jurisdictions.

Water : An Environment, a Lake, a Good, or a Service? How

should

we

determination

the

meaning

of

the

term

"water?" Is the word best understood to refer to a good or an environment. Semantically the word can take on many different referents.

In

the

Arctic

Waters

Pollution

Prevention

Act,

R.S.O.1985 c.A-12. The legislation insisted upon the importance of "the preservation of the peculiar ecological balance that now exists in the water, ice and land areas," of the Arctic region.

"Water" in this context is a broadly inclusive term

alternatively describing an ocean, inland rivers and lakes, as well as, ground water table aquifers. "Water"

is

included

in

GATT

schedules

for

tariff

reductions, in this context it refers to a good. A product that is extracted from fresh water supplies for sale and export. "Water" as referred to by the companies who desire to fill up tanker after tanker of water for export sale to the U.S., think of it as a commercial product. Who has jurisdiction to determine whether Canadian water is subject to the GATT/NAFTA regime? The obvious answer is a WTO panel, however the GATT does operate within a number of other competing regimes worth consideration for this paper. At

the

Assessment 9

Act

Federal S.C.

level, 19929,

The

claims

Canadian to

Environmental

encourage

responsible

Canadian Environmental Assessment Act S.C. 1992, c37 [CEAA] 32

authorities to promote sustainable development and maintain a healthy

economy

while

encouraging

opportunities

for

public

participation. At common law, traditional private law doctrines relating to the rights of riparian owners, nuisance, negligence, and strict liability have also been used to regulate domestic water use. It

is

safe

to

assume

that

Canadian

environmental

legislation includes the concept of "sustainability." For the purposes of forest management, British Columbia has attempted to codify sustainable use as conserving biological diversity, soil, water, fish, wild life, scenic diversity and other forest resources.

The

issue

becomes

how

much

water

depletion

is

sustainable if sustainable development is seen as development that

meets

the

needs

of

the

present

generation

without

compromising the ability of future generations to meet their own needs. Canadian Environmental Law is comprised of a number of different principles. The International Joint Commission uses the

overall

ecosystem,

the

conservation, objectives,

guiding

principles

precautionary

co-operation, sound

of

approach,

existing

science,

the

and

integrity

of

sustainability,

institutions,

adaptive

the water

measurable

management,

and

fairness. As well the principle of waste prevention is included by other environment regimes although not listed by the IJC. Waste

prevention

resources,

is

including

the the

conservation importance

and of

efficient reducing,

use

of

reusing,

recycling and recovering the products of our society.

33

Alberta's

Environmental

Protection

and

Enhancement

Act

includes a typical definition of "environment," which means the components of the earth, including the air, land and water, together with all layers of the atmosphere, all organic and inorganic interacting

matter

and

natural

living

systems

organisms that

as

well

comprise

any

as of

the these

components. Some of these definitions and principles are recognized at International Law. The International Convention on Biological Diversity defined ecosystem as "a dynamic complex of plant, animal

and

micro-organism

environment

interacting

Declaration

on

communities as

Environment

a

and

functional

and

their

non-living

unit.

Development

The

Rio

adopts

the

precautionary approach, "where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation."10 Within this framework there may be room to exclude water in its natural state from trade regulation. However, much of Canadian water is already being used for commercial purposes. For example, in the Great Lakes, the largest single use of water is for hydroelectric power generation using an estimated one trillion gallons each day. The issue becomes if NAFTA/GATT obligations

require

bulk

water

export

to

the

U.S.

in

a

proportional share, at what point in time will this breach environmental principles such as sustainability, if ever? As well,

if

trade

regulations

have

the

effect

of

breaching

environmental laws, will Canadian judicial jurisdiction have the obligation and jurisdiction to enforce "sustainable" laws, 10

Rio Declaration on Environment and Development, 14 June 1992, 31 I.L.M. 874, Principle 15.

34

or will international trade obligations provide an exemption under Canadian Environmental Law? National Treatment Article 301 of NAFTA is the source of Canada's national treatment

obligation,

"Each

party

shall

accord

national

treatment to the goods of another party." What is the scope of the national treatment obligation? GATT

Article

However,

III

NAFTA

is

restricted

Annex

301.3

to

import

specifically

measures

exempts

from

only. NAFTA

Article 301, export controls on such products as logs and fish. The question becomes, does Article 301 extend to exports as well? Is it limited to imports in its application? That such a determination

may

be

made

by

a

WTO

panel

in

opposition

to

Canada's view, undermines the Canadian right to set the terms of international treaties. Such a determination by a WTO panel will

explore

the

intentions

of

the

parties

and

the

plain

meaning of the text. It is unclear whether the intention was to restrict the application of national treatment obligations to import measures only, or only to provide further confirmation of export exemptions. It is not possible to predict with any confidence how this question might be resolved by a dispute panel at some unknown future date. If a panel were to conclude that Article 301of NAFTA

was

intended

to

apply

to

exports

as

well,

it

would

provide strong support for the argument that Canada must treat water bound for export markets, in precisely the same way it would

water

bound

for

domestic

consumption.

However,

to

misconstrue the plain language of "goods of another party" to 35

mean

"domestic

export

goods,"

seems

a

bit

extreme.

This

determination really bends the plausible meaning of the Article and

the

original

intent

of

the

drafters,

even

though

the

Appendix specifically exempts some export controls.

Proportional Share NAFTA Article 315 -Trade in Goods,

Other export measures: A

party may adopt or maintain a restriction otherwise justified under Art XI or XX (G)(I)(j) of the Gatt only if, 1. the restriction does not reduce the proportion of the total export made available to the other Party relative to the total supply as compared

to the proportion prevailing in the

previous 36 months. 2. The Party does not impose a higher price for exports than the price charged when consumed domestically. (does not apply to a quota) 3. The

restriction

does

not

disrupt

the

normal

channels

of

supply. This obligation gives rights to the recipients of current exports to a proportion of the total Canadian supply of any exported

good,

even

if

Canadian's

must

go

short.

Notwithstanding the exceptions in GATT Article XX, Canada would be precluded by Article 315 from ever reducing the "proportion of total exports shipments of the specific good." In other words, the U.S. may be entitled to a proportional share of Canadian water resources, in perpetuity, once exports begin. The Shrimp/Turtle Case demonstrates the difficulty of using the Article XX exemptions, NAFTA imposes even higher standards on 36

Canadian

attempts

to

justify

trade

restrictions.

Overall,

I

doubt if any sort of protectionist measure would survive a challenge. Investment Rights Americans have the same rights as Canadians to establish, acquire, and operate any resource company with virtually no conditions rights

attached.

relating

treatment

to

NAFTA goods

obligation

establishes

and

in

freedom

Chapter

investor

including

national

1102.

NAFTA

a

Article

1110

expropriation

measures

interfere

compensation

for

business

in

deemed

way

establishes

discriminatory

adequate

a

services

Article

from

11

that

tantamount

to

with

and a

expropriation.

Investment rights cover goods and services and probably include access rights to water in its natural state. Any

investment

right

accorded

to

nationals,

such

as

commercial water service suppliers, must also be extended to U.S. investors or breach this condition. The combined effect of national treatment for investment and the expropriation regime, require that ownership of Canadian water suppliers operating under any grant or licence, at federal, provincial or common law must also be open to foreign investors or risk the legal claim of expropriation damages. For this reason it is necessary for

the

government

investment

in

of

Canadian

Canada water.

to As

act

to

more

restrict investors

foreign become

associated with the supply of water in Canada, the risk of investor-state

claim

liability

increases.

As

well,

investor

state claims would not be resolved by Canadian courts applying Canadian law but rather would be subject to the jurisdiction of

37

international

tribunals

operating

outside

the

context

of

introduced

an

Canadian judicial norms. The Canadian Strategy Foreign

Affairs

Minster

Lloyd

Axworthy

amendment to the International Boundary Water Treaty Act of 1911

to

prevent

Canada's

anyone

boundary

international

from

waters.

waters,

while

removing Ottawa

the

water

has

provinces

in

bulk

from

jurisdiction control

the

over water

basins within their own boundaries. With the purpose of further protecting Canadian water, Environment Minister David Anderson attempted to persuade all the provinces to agree on a national accord to ban bulk water exports. The federal strategy, seeks to avoid the use of trade mechanisms to control water exports, and was designed in the belief that all provinces would agree to a national ban. Five provinces refused to sign a national accord to ban bulk water exports. If the federal government cannot

manage

to

convince

our

own

provinces

to

agree

on

environmental measures, it seems unlikely that they will have much success in the international arena. Not every province wants

to

ban

bulk

water

exports

for

obvious

economic

considerations. Part V : Conclusion The sanction for a violation of GATT if authorized by the WTO

is

a

grant

retaliate.

This

of

permission

ensures

a

to

the

stable,

aggrieved

predictable

nations

to

retaliatory

regime versus a unilateral retaliatory action with effects that may not be proportional to the damage done.

38

The

NAFTA

agreement

has

explicitly

created

obligations

within our free trade zone. Beyond this zone, WTO rules permit the use of a high tariff. Within this region, no new tariffs are allowed, but quota's may operate. The quota's however are not

the

equivalent

underlying

the

of

quota

tariffs policy

because is

an

in

this

situation

obligation

to

keep

export/import ratio's for indefinite periods of time. The federal strategy may involve trying to prevent bulk water

exports

from

Canada,

however,

agreements

previously

signed bind us to our international obligations. Treaty law is incorporated into domestic law. I believe that it is wrong to approach the WTO/NAFTA water problem from a ban perspective. Banning implies bad faith in the

international

context.

The

agreement

should

always

be

referred to and designed for providing what is necessary to preserve

water

resources

for

non-commercial

local

use

and

enjoyment. Ultimately, a WTO panel may decide the extent of Canada's obligations to international trade, and they may decide that Canada is under obligations to export bulk water to the U.S. in accordance with national treatment principles. Even if they do not come to this conclusion, investment and therefore control over service providers, will probably be caught. If extraction of water in bulk does begin to occur in Canada, it should be done under strict conditions which limit the

daily

amount

of

water

that

may

be

collected

to

a

sustainable maximum amount. (i.e. One hose at the end of one river.) Only with the passage of time does this grant of water 39

begin to pay off. It is only by viewing economic policy from a perspective

of

duration

that

our

natural

resources

will

be

maintained. Overall reductions within the Great Lakes Basin of even a foot or two a year will have drastic effects in the area. Any large depletion of the water table would result in similar environmental results. These

types

of

trade

and

investment

decisions

have

traditionally been within the sphere of Canadian jurisdiction granted by the people to officials and elected representatives. Such an international determination of economic decisions seems offensive to Canada's sovereignty over natural resources. If our representatives have committed our nation to obligations that

reduce

our

jurisdiction

over

the

exploitation

of

our

national public resources, I cannot see how this is other than a disturbing breach of a fiduciary duty owed by politicians to the people of Canada. Who benefits most under the provisions of NAFTA and GATT as concerns water exports. In this case the answer is probably U.S. agriculture. North America is moving toward one economy, one

capital

creates

an

market,

and

integrated

one

North

investment American

market.

economy

NAFTA

with

a

truly single

market for all goods and services, including the use of natural resources. That such integration undermines sovereignty seems to have little effect, when the reality is that to reject these agreements could bring serious financial hardship. NAFTA even places limits on the ability of government to regulate investment through existing or new crown corporations or

public

monopoly

enterprises. must

"act

Under

solely

in

Article

1502

accordance

any

government

with

commercial 40

considerations in the purchase or sale of that monopoly good." This provision alone negates the rational of establishing many crown

corporations,

and

limits

the

ability

of

the

Canadian

government to remove water services from the commercial sphere. In hindsight, Brian Mulroney totally undermined Canadian democracy and sovereignty by signing the NAFTA agreement and giving away domestic control over market levers. He did not have the benefit of seeing the WTO dispute resolution panels, even so, the effect of the agreement is such that the WTO may decide

interpretative

issues

over

NAFTA

Articles

that

bind

Canada and require bulk export of water or retribution in lieu thereof. In my opinion, NAFTA must be a breach of the Constitution. It is ultra vires the Constitution for foreign affairs to enter into agreements that purport to remove legislative and judicial jurisdiction originally granted and entrusted to these bodies originally

by

the

Canadian

Constitution.

As

far

as

the

agreement undermines national sovereignty it offends the rule of law. The rule of law requires that the government shall be ruled by the law and be subject to it.

Government by law and

not by men means government shall operate by general, open, and relatively stable laws. The rule of law requires the subjection of particular laws to general, open, and stable rules, such as the independence of the judiciary to ensure review powers in the face of unconstitutional executive action. If foreign affairs has the jurisdiction to make treaties relating to the Canadian and international economy, do they enjoy this jurisdiction without Constitutional limitation? Can they

deprive

or

work

toward

depriving

ownership

of

natural 41

resources

for

future

generations.

Can

Parliament

enter

into

agreements that limit the full exercise of their jurisdiction, granted to government officials by the democratic process? Do they have the authority to limit domestic jurisdiction that traditionally

has

been

important

to

Canadian

sovereignty?

Parliamentary fiat in a majority government could push through any type of legislation. How much power do they have to bind future generations? Can an assembly in Canada pass a Bill that binds our citizens and judiciary to respect the authority of a "greater

body,"

such

as

a

World

Trade

Organization,

indefinitely. A body that operates beyond the control of the Canadian people, independent of our sovereign jurisdiction. Is it

possible

for

our

legislature

to

assign

our

rights

and

freedoms over natural resources, to that of another country, indefinitely into the future? How can you pass up a right to a higher independent body in full knowledge that the right might possibly never be recovered. Can you enslave the wealth and labour of your nation for longer than the term of your elected mandate? I guess the easy answer is that a new Parliament can choose to override previous legislation it finds distasteful. It is unlikely to happen within the current market framework because

quitting

potentially

the

sever

WTO

agreement

consequences,

could

such

as

bring loss

with

of

it

profit,

restriction and reduction in trade exports and even potential volatility of global currency values. (which really begs the question

whether

wielding

a

increase

in

big

the

GATT

stick

poverty

by

that

does

not

demands

global

operate

in

conformity

economic

effect

or

regulation

risk or

by an

trade

barriers.) However, I do not see how it is not possible to retreat from the WTO treaty if a state would so choose. At this point it 42

would even be possible to establish the very same regime at the federal or provincial level. Rather than using a foreign body to negotiate for trade blocks, Canada could individually treaty with

every

place

that

will

trade

with

us

within

the

GATT

framework, outside the WTO. We have the technology. I mention this assuming that this may minimize the loss resulting from departure of the WTO forum. One main difference would be, of course, that the dispute settlement procedure would be within domestic

jurisdiction,

properly

safeguarding

Canadian

sovereignty. The

better

agreement

is

choice just

to

to

retreating

allow

from

retribution

the

NAFTA/WTO

penalties

for

infractions and work within that forum to limit the damage calculated. Of course, the actual problem is not the GATT rules so much as it is the NAFTA rules being applied in the GATT/WTO dispute panel resolution setting. If

NAFTA

investment

rules

apply

national

treatment

obligations to water and water exports, then Provincial and Federal

legislatures

may

be

open

to

private

expropriation

claims made by American investors. As between states, the U.S. may insist upon nation treatment of exports as prescribed by Article 301 of NAFTA or pay equal and proportional retribution penalties as dictated by rules of the WTO. Which is not such a bad outcome. But one wonders if we will find the political will to protect our natural resources, and if we do, will it have cost us more to participate in the WTO that it has given us in benefit? The alternative of course is to just sell the water, but to do so at a very high rate of profit, both domestically and internationally. Of course, if it were to become profitable enough, it would attract foreign investment. At this point, any 43

profit seeker with a capital pool larger in scale than any Canadian could ever amass, could buy the whole industry and then sell us back our own water for a good profit at fair global market value.

Free trade is capitalist rule.

Bibliography Alan O.Sykes, Protectionism as a Safeguard: A Positive Analysis of the GATT Escape Clause with Normative Speculations, 58 U.Chi.L.Rev. 255, 269-72 (1991). Benedickson, J. Environmental Law. Irwin Law, Canada. 1997. International Joint Commission, Protection of the Waters of the Great Lakes, Interim Report to the Governments of Canada and the United States. Innis, Harold. Essays in Canadian Economic History. (University of Toronto Press). 1956. Innis, Harold. The Bias of Communication. (University of Toronto Press). 1951. Jackson, Legal Problems of International Economic Relations, 3rd ed. (West Group, St. Paul Minn.). 1995. Barber, William. A History of Economic Thought. 1967. Water-Export Plan Springs a Leak, Ottawa Citizen, 1 December 1999. It's All for One in Blocking the Export of Bulk Water, The Globe and Mail, 2 December, 1999. A Legal Opinion Concerning Water Export Controls and Canadian Obligations Under NAFTA and the WTO, Steve Shrybman, West Coast Environmental Law, 15 September, 1999.

44