Economy & Trade, Headlines, North America

TRADE: NAFTA Claim Dismissed, Dicey Clause Remains

Emad Mekay

WASHINGTON, Jun 14 2007 (IPS) - A seven-year legal battle by the U.S. postal carrier United Parcel Service of America (UPS) against Canada, brought under a controversial free trade agreement, has been dismissed, but advocacy groups say a provision that allows corporations to sue for lost profits should be permanently dropped.

The high-profile case centred around allegations by UPS that its business was being undermined by Canada’s publicly funded network of mailboxes and post offices, which purportedly gave UPS’s rival, Canada Post, an unfair advantage.

The case was brought under Chapter 11 of the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico, and was cited as an example of how such trade deals give multinational corporations excessive power to challenge sovereign governments and domestic businesses.

“Canada Post has been exonerated of claims launched by UPS of America Inc. back in 2000,” said Moya Greene, president and CEO of Canada Post.

“For years, UPS has made allegations of unfair competition in Canada, and in every instance the allegations have been rejected by regulatory agencies and independent experts. And now the international tribunal has ruled that the allegations have no foundation,” Greene said.

The U.S. parcel delivery giant UPS has been one of the most outspoken firms pushing for open borders and the privatisation of postal services around the world. It has backed almost all of the free trade agreement signed by the United States.

Its case against Canada Post came to symbolise what could happen to sovereign nations under such deals.

Some trade experts say the landmark UPS ruling implies that state-owned enterprises and services are exempt from Chapter 11. But while the issue was settled under NAFTA rules, civil society campaigners assert that the trade deal is as problematic as ever.

“We are very happy that the tribunal rejected UPS’s complaint but that doesn’t mean we think NAFTA works,” said Deborah Bourque, president of the Canadian Union of Postal Workers. “NAFTA allowed UPS to put public postal service and jobs on trial – a secret trial.”

“The public and workers should have the right to be heard when their jobs or public services are threatened,” said Bourque.

Jean-Yves Lefort of the non-governmental Council of Canadians, a group that fought NAFTA, demanded that Chapter 11 be dropped from the trade agreement.

“Investment rules such as Chapter 11 need to be removed from NAFTA and all other trade agreements signed by Canada,” Lefort said.

Trade lawyer Steven Shrybman, who represents the groups, said that, victory or not, NAFTA rules allowing foreign corporations to sue governments are unconstitutional.

The UPS claim, which sought 160 million dollars in damages, was based on allegations that Canada Post was using its exclusive privilege to compete unlawfully in the courier business. UPS viewed that as a violation of the provisions of NAFTA.

But Greene countered that, in fact, “this dispute was about money”.

“The United Parcel Service of America is attempting to force postal administrations around the world out of the parcel and courier business in order to increase their market share,” she said. “Canada Post has been in the parcel delivery business for more than a hundred years and UPS, like other competitors, has every opportunity to compete in Canada and has their share of the very vigorous Canadian courier market.”

Greg Kane, a UPS Canada spokesperson, told IPS that his company was disappointed with the decision and was reviewing the ruling and weighing its options.

“Our primary motive for this was to develop a fair marketplace for us in Canada. And we’ll continue to promote that here in Canada and elsewhere,” he said.

The Chapter 11 provision has resulted in dozens of claims worth billions dollars against the governments of Canada, Mexico and the United States.

According to trade experts, the provision grants broad rights to foreign investors who are empowered to privately enforce these new rights by demanding compensation from governments for actions they deem as contravening their NAFTA privileges.

The cases are decided in private “investor-state” arbitration tribunals operating outside the nations’ domestic court systems, even when millions of dollars in taxpayer funds are at stake.

Labour, environmental, consumer and religious groups have long predicted that Chapter 11 could open the legal floodgates to corporate claims of discrimination and warned against replicating it in similar agreements.

According to the Washington-based Public Citizen’s Trade Watch, investors have been granted monetary compensation in five cases, while in six cases their claims have been rejected.

Although the number of concluded cases is small, some 35 million dollars has been awarded to foreign investors by NAFTA tribunals or governments as part of a settlement agreement – often involving claims that would not have been allowed under domestic law or in domestic courts, the group says.

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