Hansen Plays 'Jeopardy,' BC Loses

Minister on TILMA: Bzzzz wrong!

By Murray Dobbin 24 May 2007 |

Murray Dobbin writes his State of the Nation column twice monthly for The Tyee. You can find previous ones here.

image atom
Colin Hansen, Minister of Economic Development.

Now that the wheels are starting to fall off the PR bus promoting the Trade, Investment, and Labour Mobility Agreement, Colin Hansen is complaining that the agreement is getting unfair media coverage.

Minister of Economic Development Hansen attempted to set the province's media straight last month in what he called a "technical briefing." He's firing off long op-eds on TILMA to newspapers that publish letters to the editor critical of the agreement. But as Hansen struggles to explain why the government is right and critics are wrong about TILMA, you can almost hear that Jeopardy buzzer for incorrect answers go off with all the mistakes he makes on fundamental points.

Hansen does not seem to be aware of the unprecedented thing he did by signing TILMA. He committed B.C., on pain of having to pay millions of dollars in penalties, to not maintaining or introducing obstacles to investment. You only have to think about that for a moment to realize why other investment agreements like NAFTA do not go that far. Pretty much anything a government does -- from restricting private investment in public health to preventing urban sprawl -- can be seen as an obstacle to investment.

Hansen would have us believe that TILMA's "no obstacles to investment" clause is not a big deal because it was already written into Canada's existing Agreement on Internal Trade. A quick look at the Agreement on Internal Trade shows it does NOT say there can be no obstacles to investment. Can Hansen really be that ill-informed on such a critical point?

Weird rulings

Having claimed that TILMA will somehow attract billions of new investment dollars to B.C., Hansen is now downplaying its investment provisions, saying the agreement only applies to "border measures." Supposedly regulations applied within the province are safe. But what "border measures" are in place to stop the flow of investment from Alberta and B.C.? Does B.C. have a secret Investment Review Agency, where it turns down Albertans' investment? Albertans already invest widely in B.C, as anyone living in areas of the province with a real estate boom knows.

What TILMA in fact does is allow challenges to provincial regulations, programmes, or policies if these "restrict or impair" an investment.

A senior official in Canada's trade department, Allison Young, has explained that the business of trade negotiation "no longer deals solely with 'at the border issues' such as tariff reduction but is now grappling with 'behind the border' domestic regulatory concerns." The reach of these agreements into areas previously considered purely domestic is one reason why governments are now being hit by loss after loss of their regulatory authority at the hands of trade panels.

Some examples of these losses? At the WTO, a panel has ruled against Europe for delaying approval of genetically modified organisms (GMOs). Under investment agreements, a panel has ruled against Mexico and required it pay millions in compensation for having declared an area an ecological reserve. Another dispute panel ruled against Chile for letting local zoning bylaws block a foreign company's housing development on agricultural land.

Canada is currently being challenged under NAFTA because of its restrictions on Lindane, a pesticide banned in 50 countries, and also because the Ontario government turned down development of a waste dump.

The special risk posed by TILMA is that it goes further than any other agreement in providing grounds for investors' complaints against these kinds of regulatory decisions.

America's reach

Hansen is trying to assure local governments their bylaws are protected from challenges under TILMA's "no obstacles to investment" rule as long as they treat B.C. and Alberta investors the same. But that's not what the article says, and dispute panels are barred from reading into an agreement words that are not there. And when asked whether B.C. and Alberta would issue a binding interpretation that only discrimination could be challenged under this TILMA article, Hansen threw cold water on the idea. He said that TILMA's no obstacles rule "serves us well."

TILMA does impose -- in a separate article -- a requirement that investors from across the border be given the best treatment afforded local investors. Hansen seems blissfully unaware just how much risk governments face under this requirement not to "discriminate." If a company can prove to the satisfaction of a panel that its product is "like" one produced by a local company, it can demand the same treatment. Trade law is littered with bizarre panel rulings on this point, such as bedroom slippers should be considered "like" outdoor shoes.

It would be funny if these rulings did not have real effects. Canada lost a NAFTA case and had to pay compensation to an American company because a panel ruled that shipping toxic PCBs across the border to be processed in the U.S. was "like" having them handled in Canada. The panel said NAFTA's non-discrimination rules meant Canada had to treat the American company, wanting to do the work outside Canada, the same as companies located in Canada. So a TILMA panel could rule the B.C. government had to treat work done in Alberta the same as work done in B.C.

UPS, the American courier company, is currently challenging Canada under NAFTA saying that its private, for-profit services are like the ones offered by Canada Post and should be given the same treatment by the Canadian government. The UPS case illustrates how the non-discrimination rules in NAFTA and TILMA can be used to challenge public services.

'Subject to attack'

In his assessment of TILMA, UBC Professor of Economics John Helliwell (a recognized expert in internal trade matters) has concluded:

"In general, the combination of unrestricted access to the dispute mechanisms combined with a commitment to neutrality of treatment would make almost any provincial or municipal programme subject to attack."

But Hansen is now trying to entice local governments to allow the agreement to be extended to them by 2009 -- sort of a Final Jeopardy round where the opportunities for private investors to launch TILMA challenges would expand exponentially. Hansen is claiming that the B.C. and Alberta governments direct and control TILMA dispute panels -- even though the independence of TILMA panels and the binding character of their decisions was supposed to be the agreement's major improvement over the Agreement on Internal Trade.

Hansen told journalists in his April 26 media briefing:

"There is also a provision -- it's in Article 33 [actually Article 34] -- that says any time the two governments can actually issue an interpretation and this is unlike other agreements in that if we for example saw that a particular panel was going down a wrong track, pursuing an objective that wasn't consistent with what TILMA was meant to accomplish, then we could actually issue an interpretation that would be binding on the panels."

So there goes that wrong answer buzzer again. TILMA is in fact not unlike other agreements in this regard -- NAFTA also says that its signatories can issue joint interpretations binding on dispute panels. But in all but one case this provision has not shielded governments from negative panel rulings.

Too bad TILMA is not just a game like Jeopardy, where the minister's wrong answers would be embarrassing but wouldn't put the public interest at risk.

Related Tyee stories:


Share this article

The Tyee is supported by readers like you

Join us and grow independent media in Canada

Get The Tyee in your inbox


The Barometer

Has the IPCC climate change report made you :

Take this week's poll