Monday, June 20, 2016

Trans-Pacific Partnership: An open letter to Chrystia Freeland

On June 15, Minister for International Trade Chrystia Freeland held a town hall meeting in Toronto to consult with the Canadian public about the Trans-Pacific Partnership (TPP). I was fortunate enough to attend.

In addition to Minister Freeland, there were three panelists:
Minister Freeland opened the evening by stating she was on a listening tour, and wanted to hear what Canadians had to say about the TPP. She said she might comment at the end, but her goal was primarily to give the audience the opportunity to speak. She also said that Canada had a secret weapon - she would bring Jerry Diaz, renowned for his fierce and effective negotiating skills, to the join Team Canada at the negotiating table with other countries.

I found this puzzling - the TPP text has been completed. Further changes and negotiations are unlikely as any amendments would need to be agreed to by the other eleven participating countries. Freeland did not elaborate.

Jerry Diaz spoke next, and it quickly became clear his reputation is well-founded. His booming voice filled the hall and his passion quickly swept through the room. He complained that the Japanese and Korean economies are closed to Canadian exports. After calling the Trans-Pacific Partnership "disastrous", Diaz proclaimed that, "We [Canadian labour] are very pro-trade. But we need to protect manufacturing, like the Japanese, like the Koreans!" Rapturous applause followed.

He then stated that "Canada imported about 190,000 automobiles from Japan; Japan imported 100." He provided similar numbers about Korea. This left me puzzled, on a couple of fronts:
  • Japan drives on the left side of the road, so its vehicles have the driver's seat on the right. The country manufactures cars specifically for North American (and European) markets with the steering wheel on the left. Unless Canadian manufacturers produce cars specifically for Japanese markets, why should we expect them to import our vehicles in any significant quantity?
  • If the real issue is trade barriers, and not attempting to sell products unsuitable for the target market, wouldn't an agreement to ease trade be beneficial? There may be other reasons to consider the TPP a "disaster"; but if so, why focus on the current disparity of the number of cars Japan and Korea export to Canada vs. what they import?
Michael Geist spoke next. Freeland mentioned in her opening remarks that she read his entire "The Trouble with the TPP" series, and that her staff would race to understand each post within minutes of publication because "they knew they would be getting questions about them." He mentioned several structural problems with the TPP. "Canada was at a disadvantage throughout the negotiations," Geist said. Because Canada joined the talks late, it had to agree "not to be the lone holdout" on any part of the text. This turned out to be "not just a theoretical limitation" - Canada was forced to "cave" on several provisions in the Intellectual Property chapter when it was the sole objector.

Geist then described how the TPP would mandate changes to Canada's criminal law and Internet governance. Although Canada currently complies with international Internet intellectual property treaties, TPP countries would have to adopt US standards for protecting digital rights management technologies, including new (to Canada) criminal provisions.

"The Trans-Pacific Partnership is best thought of as a meta-treaty," Geist then argued, "because it incorporates the ratification of nine other treaties." Finally, he addressed TPP's investor-state dispute settlement (ISDS) mechanism. "CETA's [Comprehensive Economic and Trade Agreement - a proposed free-trade agreement between Canada the European Union] ISDS is the gold standard, according to Minister Freeland. Why doesn't the TPP have the same protections for all parties?"

"I'm here to argue in favour of the TPP," was the opening statement from Daniel Schwanen, the final panelist. "We have to ask ourselves - are we in or are we out?" He likely underestimated the extent of the audience's hostility to his position. "OUT!!!" the crowd shouted back, emphatically.

For a person dedicated to defending the TPP, his endorsement was surprisingly lukewarm. "Incomes will be raised on average as a result," he claimed. "Not a lot, but a bit." He didn't address any of the particular concerns raised by Jerry Diaz, nor the structural issues brought up by Michael Geist. His brief address was centred on the economic benefits of a generic free trade agreement, with nothing (beyond naming some of the countries that are part of the agreement) that was specific to the TPP. He closed with, "There will be losers from the TPP, but they will lose anyway - and they will lose less if we are in. There will be many more winners." He received some polite applause.

The microphones were then opened to the audience. There were dozens of people who wanted their voices heard - I was one of them - and every single individual was vehement in their opposition to the Trans-Pacific Partnership. Throughout, Minister Freeland sat and listened attentively, smiling and nodding consistently. I have no idea what her opinion of the TPP is.

I prepared the remarks below to read to Minister Freeland. I extemporaneously omitted about a third to reduce duplication with issues already raised by Michael Geist. There were gasps of horror as I read the first paragraph below, and a spontaneous ovation as I finished the third.


Ms. Freeland,

My name is Leslie Rosenblood, a constituent of your riding, University-Rosedale. I am generally against tariffs and protectionism and believe free trade is beneficial to all parties involved.

The Trans-Pacific Partnership is primarily an intellectual property treaty. Secondarily it functions as a profit protection plan for multinational corporations. Only incidentally does the TPP lower tariffs and trade barriers.

Therefore, as an anti-protectionist, pro-free trade citizen of Canada, I am staunchly against our participation in the Trans-Pacific Partnership.

The major thrust of the TPP is the regulation of intellectual property. It demands that Canada extend copyright protection by twenty years – retroactively. While some level of copyright is legitimate to properly reward creators for their successful efforts, I have two major issues with the changes TPP demands of Canada’s copyright regime:
  1. At the life of the author plus 50 years, Canada already provides ample compensation to its writers, and their descendants. We are currently in compliance with existing global treaties and consistent with a majority of TPP countries, including Japan and New Zealand. No academic study has concluded that extending copyright protection for another twenty years would increase incentives to create by any meaningful extent. We would be extending a government-mandated monopoly for no societal benefit.
  2. The increase is retroactive. There is no rational basis for this. By implementing the Trans-Pacific Partnership, Canada would create a decades-long desert during which no Canadian works come into the public domain. Marshal McLuhan will not write a single additional word by extending copyright to life plus 70 years; yet we are contemplating depriving publishers, scholars, and historians unfettered access to important cultural works.
Similarly, history shows that increasing patent protection does not lead to increased investment, research, or innovation in Canada; for example, despite meeting pharmaceutical company demands for additional patent protection in exchange for agreements to provide high-value jobs in Canada, drug company research and development in this nation, as a percentage of sales, has steadily decreased in recent decades.

Extending patents to cover the time required to approve them, and the additional, special data protections given to biologics, is nonsensical – it will increase costs to Canadian companies, consumers, and the Canadian government. I agree that patents are a necessary restraint of trade to incent and reward innovators. Patents must be temporary to allow the next generation of inventors to have as large a pool of knowledge, tools, and techniques to draw from as possible as they make discoveries, acquire insights, and create technologies. This in turn will lead to further research, entrepreneurship, and economic growth.

As a government with a Ministry of Innovation, Science, and Economic Development, surely you must realize that sustainable economic growth comes from widely distributed opportunities, not avenues of profit available to only a few. That is why competitive markets serve the public better than monopolies or oligopolies.

The secondary effect of the Trans-Pacific Partnership would be a corporate profit protection plan. Companies that innovate and produce goods and services that people want at a price that is both compelling to consumers and profitable to provide, deserve their riches. Business is, however, an inherently risky undertaking – and it is only a fiercely protectionist mentality that can justify offloading risk onto governments. Laws, regulations, and taxation levels change over time – and companies should be able to adapt to new circumstances. Obtaining putative future profits today - from governments - via treaties that enshrine current business practices as sacrosanct is the opposite of how a market economy should function.

Minister Freeland, you noted in an interview with Maclean’s earlier this year that the Canada-EU Trade Agreement was “gold-plated” and that “The core notion of having a dispute-resolution process is not to supersede that right to regulate — it is to ensure that governments don’t discriminate against foreign investors.” This may apply to CETA, but the TPP opens the door for corporations to sue participating governments for regulating according to the public interest if predicted future profit streams are potentially diminished as a result.

Canadian investors have an awful track record with existing investor-state dispute settlement bodies, losing over 90% of their cases. Our record defending complaints is not much better – Canada may be forced to pay half a billion dollars to Eli Lilly because the company disagreed with a Canadian court’s ruling about the validity of two patents. Canada can expect to be subject many more such payments if we join the TPP.

It is not in Canada’s interest to expose itself to enormous liability for every future legal or regulatory change.

We already have free trade agreements with the United States, Mexico, Chile, and Peru – five of the twelve countries in the TPP. We have ongoing free trade negotiations with Japan, the largest remaining TPP economy. While I welcome lower tariffs, marginal improvements in trade with distant countries such as Australia and Brunei are not worth – not by several orders of magnitude – the enormous costs involved in accepting the TPP’s numerous protectionist and anti-competitive provisions.

For the sake of an innovative, dynamic, and prosperous Canada – Minister Freeland, I urge you not to ratify the Trans-Pacific Partnership. 

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