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(This article appeared in the Ottawa Hill Times, week of Nov. 22-28, 2004)

November 21, 2004

The Canada Trade Mission to Brazil: Partners in development?

By Rick Arnold*

 

On November 21st the Canadian government is sending a 5-day trade mission to Brazil to open trade and investment doors for Canadian corporations. While the CEOs of participating Canadian companies will be ‘networking’ with their Brazilian counterparts in Sao Paulo and Rio, Canadian government officials will take the opportunity to credit ‘free trade’ agreements with increased employment and prosperity back home.

While there is no doubt that commercial activity between the U.S. and Canada has increased enormously since the bilateral FTA was signed in 1988, Industry Canada figures indicate that ‘free trade’ has only contributed to nine percent of this growth. Moreover, Canadians were told that ‘free trade’ would bring “jobs, jobs, jobs”, but most have been part-time, insecure jobs with fewer benefits, particularly for women. During the first 13 years under the U.S.-Canada accord and the subsequent North American Free Trade Agreement (NAFTA) with Mexico on board, Canada actually created less than half as many full-time jobs as during the previous 13 years.

The National Farmer’s Union (NFU) reports that the impact of ‘free trade’ policies on Canadian farmers has been dramatic. While agri-food exports have tripled under these two FTAs, net farm income, in real terms, has decreased by 24%. Some 16% of Canadian farmers have been forced off the land. Farmer-owned co-operatives, once dominant in the grain trade and in dairy processing, have been taken over or marginalized. The NFU concluded that free trade agreements ‘may increase trade but, much more importantly, they dramatically alter the relative size and market power of the players in the agri-food production chain…Free trade helps Cargill and Monsanto, not farmers.’

Since NAFTA was implemented in 1994, Canada has experienced a fundamental re-shaping of government policy, and the limits within which this policy is set. NAFTA has opened the door for unprecedented experimentation in free market policies. It is bad news that Canada and the US are pushing to export this ‘model’ to other countries in the Americas. Arguably the most controversial components in NAFTA are provisions contained in Chapter 11, which deals with investment. For example, this section significantly reduces the ability of governments to condition foreign investment in order to ensure local benefit. Put in to the Brazilian context, this NAFTA provision, if embodied in an eventual Free Trade Area of the Americas (FTAA) agreement, could prevent any further development of Brazil’s national industrial strategy.

Perhaps the most debated NAFTA investment element is the ‘investor-state’ mechanism. This provision allows investors to sue national governments for virtually any action taken in the public interest that might decrease expected profits. Chapter 11 tribunals arbitrate such cases beyond the reach of national court systems. Many free trade opponents in Canada argue that Chapter 11 goes beyond regulation to the heart of the Canadian Constitution, breaching fundamental principles including the rule of law, democracy constitutionalism and federalism.

What kind of investment is the “Canada Trade Mission to Brazil” proposing? Canada’s experience under ‘free trade’ has been that 96.6% of all the new direct foreign investment went to takeovers of Canadian firms, and only 3.4% was fresh capital for the creation of new business.

A test case illustrative of Canadian investor intentions regarding Brazil might very well be the 2002 purchase of Cervejarias Kaiser Brazil S.A. by Canada’s Molson Inc. for Can$1.2 billion. How has this takeover advanced Brazilian industrial policy? And now that Molson Inc. is itself to be taken over by U.S.-based Adolf Coors Co., a corporation with a notorious record on workers’ rights, what will be the fate of the Brazilian operations?

As globalization proceeds apace, it will be important for investors and nation states to move away from a focus on exploiting other peoples’ economies. Foreign investment needs to be tied to a genuine process of development, one that closes the gap between rich and poor. Investment dollars should go to creating a high wage economy supported by robust social policy and a strong infrastructure. Trade practices need to be brought in line with these development imperatives and be reflective of a fair exchange that rewards those whose labour is critical to the production process.

The “Canada Trade Mission to Brazil” bears all the hallmarks of a profit driven agenda that serves only to line the pockets of a wealthy few. As such it does a disservice to the values that most Canadians hold dear, and serves to diminish our nation’s credentials as a compassionate neighbour in the Americas. Many Canadians are speaking out about our own economic colonization and the consequent loss of our sovereignty. However, we welcome stronger ties with Brazil based on equitable development principles and fair trade practices.

 

*Rick Arnold is coordinator for Common Frontiers, a multi-sectoral organization involving churches, unions, international development NGOs and social movements in Canada. Common Frontiers has been a leading critic of Canadian ‘free trade’ policy for 15 years. It is also the Canadian representative in the Hemispheric Social Alliance.