The chilling effects of “sunny” diplomacy with the United States

May 1, 2016

Canadian soldiers discuss a civil-military co-operation project with school leaders in Port-au-Prince, Haiti, September 2013.

Exceptional(ist) company: Prime Minister Trudeau dines with former and current U.S. secretaries of state Colin Powell (left), John Kerry and Henry Kissinger on March 10.

Prime Minister Justin Trudeau brought his “sunny ways” to Washington this March in a major charm offensive that aimed to reinvigorate Canada’s most important bilateral relationship. Although historically the two nations have gone so far as to spill blood in order to remain distinct from one another, according to U.S. President Barack Obama they are now not only partners, but “more closely aligned than ever.”

The ideological overlap and personal rapport between Trudeau and Obama undoubtedly present opportunities for progress on a range of issues relating to trade, security and the environment. However, the danger for Canada is that this temporary personal alignment will take us even further down the path toward permanent economic and security integration, which would ultimately limit Canada’s policy options in the future. In other words, a warmer relationship in the short term may have a chilling effect on the long-term exercise of Canadian sovereignty.

Firstly, Obama is currently trying to persuade Canada to ratify the Trans-Pacific Partnership trade agreement (TPP), which would further extend the power of multinational corporations to sue governments, including Canada, when they enact unfavourable (for business) laws or regulations. If the TPP is ratified, the number of multi-million-dollar lawsuits Canada already faces annually under the North American Free Trade Agreement (NAFTA) is bound to proliferate, putting a chilling effect on efforts to regulate for environmental protection, public health or higher labour standards at the federal and provincial levels.

Secondly, like many prime ministers before him, Trudeau has already faced pressure to satisfy or even pre-empt U.S. security concerns in order to maintain an open border for trade. This growing imperative in Canadian public policy stems from Canada’s economic dependence on the United States. It threatens to negatively impact the Liberal government’s review of national security legislation (Bill C-51), as well as its approach to refugee and immigration policies. 

Such disturbing possibilities were predicted and fiercely resisted a generation ago by Pierre Trudeau’s government. In 1972, Canada’s Department of External Affairs took the position that further economic and cultural integration with the United States should be avoided, as it would inevitably lead to greater integration of other sorts, including political, and was thus a threat to Canadian sovereignty. With these concerns in mind, the elder Trudeau oversaw the establishment of the Foreign Investment Review Agency, which sought to protect Canada from domination by foreign corporations.

By 1994, these concerns were resoundingly rejected in NAFTA. The binding multilateral treaty phased out tariffs on Canada–Mexico trade (Canada–U.S. tariffs had been almost entirely eliminated by the earlier bilateral free trade agreement), but more importantly addressed so-called regulatory barriers to trade throughout North America, theoretically producing aggregate economic gains for the continent as a whole by increasing competition and allowing for the “creative destruction” of less competitive businesses and industries. Though trade flows increased substantially, the economic returns were not reflected in real wage growth, particularly in the manufacturing sector, which has slowed nearly to the point of stagnation in the decades since NAFTA came into force.

The TPP and the expansion of corporate rights 

Probably the most troubling effect of NAFTA on Canadian sovereignty has been the increased standing that foreign corporations achieved through Chapter 11 (Investment) and the agreement’s investor–state dispute settlement (ISDS) process. The investment chapter precludes NAFTA governments from putting conditions on inward investment (e.g., the use of minimum amounts of domestic content or services, or other performance requirements designed to improve the domestic economy). At the same time, the ISDS process allows foreign investors and corporations to challenge new government laws or regulations as being tantamount to expropriation and/or in breach of guaranteed “minimum standards of treatment.” These clauses have been interpreted so broadly by arbitration panels established under NAFTA and other international investment agreements that the expectations of corporations are increasingly viewed as a component of fair and equitable treatment.

Two current cases demonstrate the problem with this unnecessarily expansive approach to protecting foreign investors. In the United States, TransCanada is currently using NAFTA’s ISDS process to sue the U.S. government over its rejection of the Keystone XL pipeline. In Canada, Lone Pine Resources is challenging Quebec’s decision to place a moratorium on fracking pending an environmental impact assessment. In both cases, foreign corporations are seeking to tie the hands of governments as they attempt to set a high bar for environmental stewardship. Whether successful or not, even the potential loss of hundreds of millions of taxpayer dollars ($15 billion in the Keystone case) will undoubtedly weigh heavily on future governments contemplating taking bold action on the environment. 

With the benefit of hindsight, the drafters of the TPP could have crafted much narrower language to protect foreign investors. Instead, they have essentially replicated and extended this needlessly troubling component of NAFTA to corporations in each of the 12 states that are parties to the agreement. Accession to the treaty is automatically open to all members of APEC, as well as to other countries by agreement, which makes the scope for ISDS challenges potentially limitless. 

The TPP, like a pending free trade deal with the European Union (CETA), also obligates Canada to extend the term of patent protections on brand name drugs by up to two years. This will ultimately increase health care costs domestically and in the developing world, and will do so at a time when drug prices are already disproportionately high in Canada. For pharmaceutical companies, many of them based in the U.S., this means more money, which theoretically could provide an incentive for them to innovate. However, these largely corporate benefits would be gifted at great cost to Canada’s publicly funded health care system. 

If Canada ratifies the TPP, it will be at once a stunning rejection as well as a vindication of Canada’s concerns in the 1970s. Multinational capital will take on a greater economic presence in all TPP countries, dramatically limiting the scope of Canadian political decision-making. Just as was predicted more than 40 years ago, economic integration will have led to increasing levels of political integration, reducing the ability of the Canadian public to decide, through our democratic processes, the scope of our own environmental, public health and labour protections. 

All of this is to say that a close relationship between Trudeau and Obama will have a lasting cost to Canadian sovereignty if it leads to ratification of the TPP.

The North American security-trade nexus

Unfortunately, threats to Canadian sovereignty are not limited to this one decision and may in fact permeate a broad range of issues facing the new Liberal government. Most notably, recent history strongly suggests that further economic integration with the United States will drive political integration in the context of national security and immigration policies. 

Ultimately, this trend also stems from NAFTA. By further integrating the North American market, creating the assumption of minimal trade barriers, NAFTA has altered the foundations upon which many successful businesses are built, and created an imperative for Canada to maintain the openness of our southern border. Reducing the economic benefits of an open border would jeopardize this foundation, and therefore carry heavy economic costs, rendering NAFTA binding both legally and practically. 

However, the economic costs of any increased border controls would not be evenly distributed across North America: integration through NAFTA has created a disproportionately strong incentive for Canada to keep the border as open for trade as possible. As of 2014, total trade between the two neighbouring countries amounted to $751 billion, which represented 42% of Canada’s GDP, but a mere 4% of the U.S. economy. This disparity explains why the border is a much more significant consideration in Canadian political decisions than it is in the United States.

Since the terrorist attacks of September 11, 2001, the threat of border restrictions has loomed large over security and immigration policy changes in Canada. At times, the threat was made clear by the United States. In 2006, in the midst of the scandal surrounding the extraordinary rendition and torture of Canadian-Syrian dual citizen Maher Arar, the U.S. State Department characterized international outrage as a mere distraction from the “greater concern for the United States: the presence in Canada of numerous suspected terrorists and terrorist supporters.” The report went on to criticise Canada for neglecting to prevent Ahmed Ressam, the "millennium bomber," from remaining in Montreal and obtaining a Canadian passport after being denied asylum. These criticisms echoed an earlier report by the U.S. Federal Research Division that linked Canada’s refugee and asylum policies to its status as a nation hospitable to terrorism.

In the face of this rhetoric, satisfying and even pre-empting U.S. security concerns became crucial for the Canadian government. John Manley, then deputy prime minister, asserted in 2002 that, “with almost half of our GDP dependent on access to the U.S. market, it is imperative that our shared border be kept open.” He went on to expressly acknowledge that “concern for public security is…intrinsically linked with our concern for economic security.” 

In other words, the sovereignty concerns of the 1970s were realized, as close economic integration with the United States created an imperative for other types of integration, particularly in the realm of national security, in order to maintain existing economic benefits.

This imperative to pre-empt security concerns manifested itself in many ways. In 2002, Canada and the United States began implementing elements of the Smart Border Declaration and Action Plan, which included sharing passenger information on flights between or through each country, joint training and operations of border and national security enforcement teams (with bases in both countries), and immigration information sharing through the development of compatible databases. Together, these measures put the personal information of Canadian residents in the hands of a foreign government on an unprecedented, ongoing basis.

Believing this to be merely a first step, Obama and former prime minister Stephen Harper announced, in 2011, that Canada and the United States intended to “pursue a perimeter approach to security, working together within, at, and away from the borders of our two countries.” The joint statement emphasized at length the importance of NAFTA in increasing trade and investment flows between the two countries. 

The overarching purpose of this perimeter approach, which would include an integrated entry-exit system, was purportedly to “support economic competitiveness, job creation, and prosperity.” The unspoken cost was an even greater erosion of privacy and mobility rights.

Why history is repeating itself

Trudeau and Obama’s recent agreement to share even more information on border-crossers fits easily within this recent history and can hardly be seen as a major departure from the approach of previous Canadian governments. The Beyond the Border Action Plan has already resulted in the automatic sharing of all information relating to the identity of refugee claimants as well as information related to any decision to grant, deny or terminate their refugee status. The fact that Canada has chosen the United States as its exclusive partner in this program is no doubt influenced by the importance Canada places on the border. 

After 9/11, Canada undertook changes in immigration law and made enormous steps toward security integration with the United States to reassure its neighbour about the security of the shared border. While this may have temporarily satisfied the U.S. administration, history appears to be repeating itself. Just as the explicit and implicit threat of border controls after 9/11 led Canada down a path of diminished rights, particularly in terms of privacy, the 2015 terrorist attacks in Paris may already be leading the Liberal government to backtrack on national security and refugee policy changes.

As much as Obama appears to be satisfied with Trudeau’s approach to Canadian security, the U.S. Senate has already used the implicit threat of border restrictions to put pressure on Canadian decision-makers. 

In February, a U.S. Senate Homeland Security Committee held a meeting titled “Canada’s Fast-Track Refugee Plan: Unanswered Questions and Implications for U.S. National Security,” in which Chairman Ron Johnson, a Republican from Wisconsin, expressed concern over “the porous nature of the U.S.-Canada border” and the pace of refugee resettlement under the new Liberal government. This pressure is likely to continue on a range of issues, particularly if Obama is succeeded by a Republican president, or even if the GOP simply retains control of Congress.

After the Liberals formed government, Prime Minister Trudeau extended a self-imposed deadline to admit 25,000 Syrian refugees and decided not to admit straight, unaccompanied males as part of the program. We may never know the extent to which these decisions were influenced by the advice of the Canadian security establishment, a desire to pre-empt U.S. security concerns, or simply the better optics of welcoming families with children at the airport. We do know, however, that fear of U.S. reaction has strongly influenced past Canadian governments, particularly in the wake of terrorist attacks. Trudeau seemed to acknowledged this in Washington when he defined one of his primary goals of his meeting with Obama as “making sure there is a smooth flow of goods and people across our shared border that isn’t putting our security at risk.” 

It was straight out of Manley’s playbook from his days in government, and mirrored his request of the Liberals now that he helms the powerful Business Council of Canada. “Given the international security environment, governments are naturally concerned about nefarious actors using international trade and travel networks to advance their objectives,” Manley wrote in an column in February. He called for the conclusion of a preclearance agreement for Canadian factories and the expansion of a bilateral “trusted traveller program” for business travellers at the border. “Canada and the United States should develop a protocol for the sharing of key data, including our respective ‘no-fly lists’,” he added.

U.S. pressure on Canada extends beyond the refugee, border security and TPP fronts. Trudeau’s promised review of the 2015 Anti-Terrorism Act (C-51) could be influenced by pressure from the United States to retain problematic provisions, such as increased sharing of sensitive personal information between government agencies, and the new right of the Canadian Security Intelligence Service (CSIS) to disrupt what it believes to be potential threats to national security. Under C-51, personal information held by seventeen federal Canadian institutions can now be accessed by the RCMP, including information held by Health Canada and the Canada Revenue Agency. Whether Trudeau’s commitment to even greater information sharing with the United States will ultimately include this highly sensitive personal information is now an open question. 

Such concessions may be tempting for Canada if they lead to a closer relationship in which trade benefits can be further secured. For instance, the longstanding issue of Canadian softwood lumber exports has re-emerged with the recent expiry of a comprehensive 2006 agreement. Trudeau and Obama claim to be on track toward resolving the issue, but they have not yet offered any details. As the world’s largest net trader of forest products, Canada has a disproportionate interest in creating market certainty. This can easily lead to a lopsided negotiation in which the U.S. secures concessions from Canada unrelated to forestry. 

Friends without benefits?

Following the D.C. trip, media and political commentators seemed convinced that a new era in U.S.–Canada relations had begun, and that it could only be beneficial for Canada. Just getting Canadian issues on the agenda is a coup, said Manley in one interview,while the television news broadcasted clips of Mulroney and Reagan singing “When Irish Eyes are Smiling,” as if their still contested trade agreement represented the pinnacle of the bilateral relationship. The fact is good relations can lead to bad policy no matter which party forms government.

The final months of the Obama administration present opportunities for Canada, but also serious long-term risks. Ratifying the TPP would certainly please the current U.S. administration, but also permanently undermine the ability of future Canadian governments to contain the cost of drugs, or set higher environmental, health and safety standards. The government has promised to review recent national security legislation in order to safeguard the security and civil liberties of Canadians, and ensure greater accountability to Parliament and the public. But these hearings should be guided by human rights concerns, not the effect of policy reform on trade flows. 

Finally, Canada’s response to the largest refugee crisis in human history should continue to reflect our national values, rather than the suspicions and fears of a powerful neighbour. Dispelling these fears must be done with the power of rhetoric and example so that we might stop trading away our sovereignty, piece by piece, to foreign governments and corporations. 

Key dates in Canada–U.S. integration

1994: NAFTA establishes a continental free trade zone, eliminating most tariffs while committing Canada, Mexico and the United States to ongoing working group discussions on how to manage integration.

1995: President Clinton and Prime Minister Chrétien sign the Canada–U.S. Accord on our Shared Border, which aims to promote trade, facilitate the legitimate movement of people (while “providing enhanced protection against drugs, smuggling, and the illegal and irregular movement of people”), and reduce costs to government.

1999: Canada and the U.S. confirm the Shared Border Accord’s guiding principles for border co-operation as follows: 1) “Streamline, harmonize and collaborate on border policies and management”; 2) “Expand co-operation to increase efficiencies in customs, immigration, law enforcement and environmental protection at and beyond the border” (emphasis added); and 3) “Collaborate on common threats from outside Canada and the United States.” These tasks are to be carried out by a new Canada-U.S. Partnership Forum, with a role for the provinces, border communities and private stakeholders.

2001: Immediately following the terrorist attacks of September 11, and fuelled by fears of U.S. border closures, the Liberal government passes controversial new anti-terrorism legislation similar to the USA PATRIOT Act. In December, Canada and the U.S. sign the Smart Border Declaration and 30-point action plan charting a common understanding of what constitutes a threat to national security and how to address those threats. The plan involves high-technology border infrastructure, the broad sharing of personal information on travellers to both countries, the development of “compatible immigration databases,” etc. 

2005: U.S. and Mexican presidents Bush and Calderon and Prime Minister Martin sign the Security and Prosperity Partnership (SPP), an attempt to expand the “smart border” concept to the whole continent. In 2006, a trilateral big business committee is incorporated into the inter-government discussions and eventually tasked with prioritizing efforts for security and regulatory harmonization. The SPP is dropped in 2008 by incoming president Obama.

2007: Canada’s Passenger Protect program (“no fly” list) comes into effect. While billed as a Canadian response to U.S. pressure for more information on passengers flying to or over North America, it soon becomes clear Canadian residents are being unfairly harassed by airport officials or blocked from flying by Canadian airlines based on their inclusion on the lengthy U.S. “no fly” list. 

2011: President Obama and Prime Minister Harper issue a joint declaration called Beyond the Border: A Shared Vision for Perimeter Security, which largely adopts the shelved SPP plans, but with an even more militaristic flavour implied by the term perimeter. “Through the perimeter approach, Canada and the U.S. committed to working together at, and beyond the border, to enhance our security and accelerate the legitimate flow of people, goods and services,” said a 2012-13 Department of Public Safety performance report. 

2016: Canada and the U.S. dispense with the name “Beyond the Border” but continue the general program. “Both countries will fully implement a system to exchange basic biographic entry information at the land border. This builds on the process already in place for third-country nationals, and allows Canada and the U.S. to enhance border security in an effective and responsible way,” says a March 10 joint fact sheet. A new Canada–U.S. group is “tasked to generate and implement regulatory co-operation initiatives between the two countries on an ongoing basis, and for the first time this will include senior officials of regulatory departments.” A Canada-U.S. Redress Working Group is also struck to sort out the growing number of complaints against both countries’ “no fly” lists.

Rob Mason is a law student at the University of British Columbia with a background in international relations and American studies. 

This article was published in the May/June 2016 issue of The Monitor. Click here for more or to download the whole issue.