The Globe and Mail
December 13, 2000
By Mark MacKinnon

OTTAWA -- Canada is seeking a review of the controversial Chapter 11 of the North American free-trade agreement, which allows companies to sue member countries to protect their investments.

In an interview with The Globe and Mail yesterday, Trade Minister Pierre Pettigrew said he has written his counterparts in the United States and Mexico to inquire about their feelings regarding the chapter, which has figured prominently in a number of high-profile lawsuits against the three member states.

Canada is in talks on a proposed free-trade agreement of the Americas (FTAA). Mr. Pettigrew said he will not sign a deal if it includes a Chapter 11 equivalent.

"That's my position," he said. "I'm very preoccupied with this."

Ottawa-based trade consultant Peter Clark said yesterday the government is realizing that Chapter 11 is "more investor friendly" than NAFTA's authors had intended it to be.

The chapter, which ostensibly protects foreign investors from discriminatory treatment, has been used -- or used as a threat -- on numerous occasions when environmental or cultural policies differ among the three member countries.

"The U.S. and Canada expected they were putting in a protection for their investors against Mexico. They never thought it would be used against themselves," Mr. Clark said.

"They want to clarify it in a certain way to limit the scope for investors to make claims against governments for what governments see as legitimate regulatory activities."

Changing Chapter 11 will be difficult, Mr. Clark said, because Mexico has no interest in reopening the agreement for fear the United States would make a host of other demands at the same time.

Last month, in one of the few decisions to date, a NAFTA tribunal ruled that S.D. Myers Inc., an Ohio-based waste disposal company, was damaged by a Canadian law that banned the export of polychlorinated biphenyls (PCBs), a toxin and suspected carcinogen. The award could be as high as $50-million (U.S.) in that case.

"Mr. Pettigrew is being forced to admit the obvious -- that Chapter 11 is bad news in a bad agreement," said Peter Julian, executive director of the nationalist Council of Canadians.

Mr. Pettigrew's anti-Chapter 11 stance is just one part of a negotiating position his department is rolling out as part of a movement toward an FTAA agreement, which would include the 34 countries of North and South America. The agreement is expected to be in place by 2005. Negotiations are beginning in earnest in advance of this spring's Summit of the Americas in Quebec City.

Canada will also be pushing for the elimination of agricultural export subsidies -- a key beef Canadian farmers have with the United States, which heavily subsidizes its farmers -- and the creation of a multilateral competition watchdog.

While much of Canada's bargaining position for the FTAA (which will be posted today on the Trade department's Web site) http://www.dfait-maeci.gc.ca/tna-nac/ftaa_neg-e.asp is based on established World Trade Organization practices, there is an attempt in its preamble to accommodate those who criticize such multinational bodies.

The draft preamble includes a "commitment" to promote higher standards of living, recognize the need for countries to preserve their cultural identity and better protect the environment. There's also a reference to the need to work with the International Labour Organization to promote worker rights.