Progressive Trade Policy, Redux

Last November, the Government of Canada launched what it called a "Progressive Trade Policy" agenda. I wrote a little piece offering a few critiques (linked here). The punchline was that I thought it was devoid of much substance, starting with default proposition that trade liberalization as practiced was not progressive. Trade liberalization is inherently progressive. Always has been.


Earlier this week, Canada and Israel announced they had "modernized" their 1997 Free Trade Agreement. As I noted in my earlier post, Canada and Chile recently announced a similar modernization, complete with a new chapter on gender and trade. Achieving gender equity should be an explicit goal for every government. I also thought including a chapter on gender in the revised Chile agreement served as a kind of agenda-setting device; merely placing language there at gives it a form and reality that it would otherwise not have. Including in the text pathways to empowerment long ago acknowledged elsewhere is an important marker to lay down.

 Moreover, I compared it to the way in which the environment has become an increasingly important part of trade policy, starting with the NAFTA (yes, the much maligned NAFTA) in 1994. Most rich-country governments now regularly conduct environmental assessments of proposed trade agreements, and the Commission on Environmental Cooperation (CEC) created by the NAFTA Side Agreements, has become far more robust as an institution than most people realize-- again, just having language inserted at all was a big win.

Yet, critics of all this could argue that government environmental assessments are pro forma, empty exercises that rarely have much impact. Similarly, many would argue that the absence of serious institutional teeth in the CEC has limited its impact. It's a valid argument. Indeed, for all of President Clinton's interest in making sure side agreements were included to make the NAFTA politically salable, the three governments didn't provide much institutional heft. Part of the blame there rests with Ottawa's insistence on Annex 41 of the Environmental Side Agreement wherein the provisions would only be applied insofar as the provinces could be convinced to go along. Because of the way the Canadian Constitution allocates power to the provinces (natural resources in particular), Annex 41 meant Ottawa wouldn't be doing very much to get the provinces to go along.

One of the problems I had with including a gender chapter in the modernized Chile Agreement was that, much like the NAFTA Side Agreements, it was empty, devoid of real impact. Indeed, Article N bis-06 excluded any issues arising from the gender chapter from being addressed within the dispute settlement mechanisms. Could the Trade and Gender Committee created by Article N bis-04 generate important recommendations for both countries? Sure, except there's no mechanism to get the two governments to implement any of them.

Fast forward to this week's announcement about the modernized Israel FTA. With much fanfare, Canada's Trade Minister, Francois-Philippe Champagne, announced that the new Israel FTA would also have a gender chapter, but that this one would include access to dispute settlement mechanisms. Moreover, the Canada-Israel FTA would be the world's first agreement allowing this.

Self-satisfied Progressives?

Cue the marching bands. This is Canada's Progressive Trade Policy at work.

Well, not so much.

You don't have to read very far into the text of Chapter 13 Trade and Gender to discover that this too is a little less progressive than advertised. Parts of Chapter 13 are on the money, especially 13.1, which acknowledge the connection between trade and economic opportunity for women. These are benefits of trade that have been acknowledged by economists, civil society, and activist organizations for a very long time. In fact, the most "progressive" aspects of having such language embedded in an FTA flow from the impact of run-of-the-mill liberalization itself.

Instead, Minister Champagne emphasized the emptiest of Chapter 13's provisions, the dispute settlement mechanisms, which read like this:

Article 13.6: Dispute Settlement
1. The Parties shall make all possible efforts, through dialogue, consultations and cooperation, to resolve any matter that may arise relating to this Chapter.
2. If the Parties cannot resolve the matter in accordance with paragraph 1, they may consent to submit the matter to dispute settlement in accordance with Chapter Nineteen (Dispute Settlement).

Importantly, 13.6.2 requires both states to consent to having a dispute related to gender dealt within the dispute settlement mechanisms. Individuals who feel they've been injured due to gender discrimination in the context of Canada-Israel trade will not be able to access those mechanisms unless both states consent; it's a rather large caveat to the application of dispute settlement that doesn't strike as especially "progressive."

The Canada-Israel FTA modernization does represent an evolution from the Canada-Chile FTA modernization. In the Chile text gender was specifically excluded from any connection to dispute settlement. In the new Israel text there is some faint hope of using dispute settlement,... very faint. 

At bottom, states like their sovereignty. But sovereignty in the service of the state can be a powerfully defensive, at times regressive, force.

ISDS as many critics see it

There are remarkably few institutions in international trade that act as final arbiters in disputes. One of the few, Chapter 11 of the NAFTA, provides the holders of private investment capital recourse to a set of binding dispute settlement mechanisms to challenge state measures affecting their investments. Moreover, Chapter 11 and other so-called investment dispute settlement mechanisms (ISDS) allow the private actor to initiate the proceedings. And, once completed, tribunals rule in a binding fashion with the capacity to confer damage amounts. Howls of criticism have grown with each and every ISDS case around the world. For a brief period starting in 2011, Australia refused to include ISDS in any of its trade agreements. Others, like the United States and EU, have worked to alter the legal language to ensure the state's right to regulate in the public interest. Europe has formally proposed the creation of an International Investment Court, in part, to mollify public criticism around the undermining of sovereignty. More recently still, the Trump Administration has proposed scrapping of ISDS entirely from any NAFTA 2.0 agreement.

Most other institutional provisions in trade agreements are not as robust. Chapter 19 of the NAFTA, for example, has a kind of mythical status for some in Canada and Mexico, but contains no means of forcing action on anyone. The same can be said for the World Trade Organization's rules. Hence, we have a system of transparent rules-based trade, but but it's a system negotiated into existence by states and, not surprisingly, states tend to want to exercise some control over the terms of their participation in those rules.

Thus far, the "progressive" in Canada's progressive trade policy seems to do the same. Agenda setting, and acknowledgement of important issues in the text of trade agreements is one thing. Ceding sovereignty to supranational institutions is another matter entirely. Hence, the limited nature of the modernized Canada-Israel FTA covering gender. If, as Canada's "Progressive Trade Policy" intends, we see chapters in future agreements dedicated to aboriginal peoples, can we really expect anything different?

In fact, as the resistance to ISDS around the world demonstrates, we have seen a generalized retreat from supranational forms of pooled or ceded sovereignty. Canada was reluctant to have its environmental policies scrutinized via the CEC in 1994, nor are thrilled with being the defendant in 21 of the 55 NAFTA Chapter 11 cases that have been filed. How enthusiastic will Ottawa ever be about having other sensitive issues scrutinized and forcibly altered from outside?

Hence, my expectation is for more platitudes to being "progressive" when genuinely inclusive, empowering and, hence, progressive trade policy actually entails liberalizing more trade.