This explainer was written by a group of UBC graduate students as part of our Lind Initiative series on inequality. It was an assignment from a course on public policy.
1. What is the TPP?
On October 5, after seven years of closed-door negotiations, the first public draft of the Trans-Pacific Partnership (TPP) was released. If ratified, the TPP would be the world’s largest free trade agreement, involving 12 Pacific Rim nations and accounting for 40 percent of the world’s economic output. The current signatories are: Canada, the United States, Mexico, Peru, Chile, Singapore, Brunei, Japan, Vietnam, Malaysia, New Zealand and Australia. As of October 2015, all signatories have two years to ratify the agreement.
The TPP reduces trade barriers, giving Canadian firms more access to the foreign markets of the other signatory nations. Likewise, foreign firms from those other nations will enjoy less restricted access to Canadian markets. Concessions made in the Canadian auto sector and the supply managed dairy and poultry sectors have been scrutinized throughout the negotiation process; however, now that the full text has been released, there is even more for Canadians to consider.
2. Where does Canada stand?
While in office, Stephen Harper signed the TPP on behalf of Canadians. His support for the deal was made clear in a statement following the text’s release: “The deal is, without any doubt whatsoever, in the best interests of the Canadian economy.”
Despite pressure from foreign government leaders to ratify, Prime Minister Justin Trudeau has been clear that he will not rush into signing the deal without due consultation between his ministers and the public. Considering Trudeau’s cautious stance, the discourse that arises out of public debate over the TPP could ultimately influence whether the Liberals support or oppose the agreement.
3. Why support the TPP?
In a nutshell, TPP supporters argue that this agreement will stimulate trade and provide access to new markets for Canadian producers. From a consumer perspective, proponents of the TPP believe it will lower prices and provide access to a wider variety of goods, including food products. Some argue that these lowered prices would increase food security. For example, increased dairy imports from the U.S. could increase competition, which may lead to lower prices and improve access for low-income consumers. However, these price effects are debated.
4. Should Canadians be skeptical?
In a recent conversation, as a part of UBC’s Lind Initiative, Nobel Laureate Joseph Stiglitz emphatically stated that the benefits of the TPP,“have been greatly exaggerated.” While the benefits may have been overstated, he further emphasized that the costs, namely the loss of national sovereignty in regulatory power, have been understated.
This loss of national control in the food system would result in a reduction in what is called food sovereignty. Food sovereignty does not imply self-sufficiency or a staunch anti-trade sentimentality. Instead, it refers to the ability of Canada to define and control its national food systems while acknowledging that Canada is integrated into a global food system.
Our concept of food sovereignty emphasizes that the definition and control of the food system is not held solely by the state. Through the democratic process, Canadians have the right to shape their food system through the creation, expansion or elimination of regulations to protect their farmers, consumers or the environment. According to food sovereignty principles, Canadians should be able to decide if they want genetically modified salmon in their grocery stores or bovine growth hormones in their dairy products.
If the TPP alters the dynamics of who defines and controls Canada’s food system, it would be a concerning prospect. In particular there are worries about three potential manifestations of the TPP that could erode Canadian food sovereignty: increased corporate power through consolidation; the ability for foreign corporations to sue Canada for future regulations (particularly in the areas of food safety, food labelling or environmental standards) that reduce expected profits; and intellectual property rights that will make it harder for farmers to save, breed or sell seeds due to patent restrictions.
5. Will the TPP contribute to consolidation?
The trend in Canada’s food system is toward fewer, larger firms controlling higher percentages of the market. This process is called consolidation. The Government of Canada acknowledges that consolidation is “happening across the entire agri-food system.” According to a 2005 report by the Canadian Agri-food Policy Institute, most of our food system is highly concentrated, with the top five or fewer firms controlling anywhere from 55-98 percent of their respective sectors (ex. primary processing, agricultural inputs).
The trend toward consolidation and bigger firms is not necessarily a bad thing. Large agribusiness operations can be extremely efficient and can bring lower food prices to consumers through economies of scale. So long as the distribution of food is equitable, nutritionally adequate and culturally appropriate, lower food prices could improve food security.
However, from a food sovereignty perspective, consolidated markets can lead to the concentration of power among the few firms that dominate the market in which they operate. This is a concern as these dominant firms could abuse their market power and undermine the democratic process of defining Canada’s food systems. This position allows large firms “privileged access to information, to capital and to political power, all of which help to limit competition by creating barriers to entry” for other, smaller firms.
In the process of consolidation, small firms may lose out. Why is this a concern? A recent report commissioned by the Manitoba government on the small-scale local food sector suggests that while small-scale farms represent a relatively small proportion of total national farm income, “if one considers the number of farm families that are supported in whole or in part by small scale agriculture, then the picture changes significantly. Small farms represent a large component of Canada’s total rural social capital residing in the rural areas.” A healthy food system accommodates both local, small-scale food producers and processors alongside large-scale agribusiness. However, the TPP may leave little room for small firms that make only mild contributions to the GDP but that provide crucial sources of rural employment and social capital, strengthening the fabric of Canada’s rural communities.
Even though Canada is already seeing fewer, bigger firms across the food system, the TPP could further this trend by enabling large firms to pursue transnational strategies that favor integrated markets. The UN special rapporteur on the right to food, Olivier De Schutter, describes this trend towards globalized markets – the type of market the TPP promotes – saying, “Large agribusiness corporations have come to dominate increasingly globalised markets thanks to their ability to achieve economies of scale and because of various network effects…the dominant position of larger agribusiness corporations is such that these actors have acquired, in effect, a veto power in the political system.” Through the concentration of political power of large firms and continued marginalization of small-scale producers and processors, the TPP could contribute to the erosion of the ability of Canadians to define the country’s agriculture and food system and support a diverse portfolio of firms.
6. How could the TPP affect Canadian food regulations?
Under the TPP, a variety of food related regulations designed to protect Canadian consumers could be considered barriers to trade and eliminated. According to the Institute for Agriculture and Trade Policy, “food safety standards that offer a greater level of consumer protection than international standards […] could be judged as illegal trade barriers.” Food safety regulators face a steep burden of proof to show that their regulations are the least trade-restrictive rules possible, a burden likely to discourage future, more stringent food safety regulations. For example, Uruguay’s decision to increase restrictions on tobacco marketing resulted in a lawsuit from Philip Morris, a Swiss-based tobacco company. Philip Morris contends that the restrictions are a violation of the Swiss-Uruguay bilateral trade agreements because they may reduce the company’s expected profits and infringe on the company’s right to a “stable and predictable regulatory framework.” Should Philip Morris succeed, other governments will learn that trade agreements focused on reducing trade barriers may allow foreign corporations to undermine state-level regulations, even if they are in the public interest.
The TPP would also allow milk that includes hormones, including the controversial bovine growth hormone, into Canada. In an official statement, Green Party Leader Elizabeth May expressed her concerns with this issue: “In Canada it is still illegal to use bovine growth hormone [rBST] to increase milk production […] We really do not know the effects of this hormone on humans, which is one of the reasons why Europe has already banned rBST. The International Agency for Research in Cancer has concerns that rBST increases cancer in humans.”
7. How could the TPP affect seed rights?
Seed sovereignty is the ability for farmers to save, breed and exchange seeds. Over the past several decades increased intellectual property rights have provided multinational corporations with the ability to patent seed varieties. Previously farmers were only restricted from planting, saving or exchanging patented varieties; however, the TPP and coinciding legislation could restrict farmers’ access to unpatented varieties.
According to a Wikileaks document, under the TPP, signatories must join the International Convention for the Protection of New Varieties of Plants 1991, known as UPOV91. This convention is a requirement for any country that enters a trade agreement with the United States. In order to bring Canada within compliance of UPOV91, Bill C-18 was passed in 2015. Bill C-18 amends the Federal Plant Breeder’s Act, ratifying provisions under UPOV91 and extends the definition of plant breeders to include large multinational seed corporations. By designating corporations as plant breeders, the corporations are able to charge royalties on non-patented seed varieties, which farmers previously did not have to pay. Furthermore, farmers are unable to save, store or replant un-patented seeds without permission from the corporation.
The Government of Canada stated that the UPOV91 will “modernize Canada’s federal agriculture legislation and encourage innovation in the sector.” The Canadian Federation of Agriculture further supported Bill C-18, citing innovation and new seed varieties as benefits. On the other hand, Canada’s National Farmers Union (NFU) was explicitly opposed to UPOV91 and Bill C-18. The union speculated that new royalty payments and restrictions on access to seed could drive up costs for farmers, increasing concentration and further contributing to the trend of fewer and larger farms across Canada. The NFU argues for public plant breeding.
It is not explicitly clear that Bill C-18’s inclusion of UPOV91 provisions is directly in response to the TPP. However, the requirement of intellectual property right provisions, such as requiring countries to join UPOV91, may be becoming the new norm in free trade agreements like the TPP.
Regardless of the causality of the initial creation and passing of Bill C-18, the incentives remain clear: Canada cannot remain party to the TPP agreement without Bill C-18 or another law that makes Canada a member of UPOV91. Therefore, even if not the sole motivator, the TPP further encourages restrictions on seed sovereignty by limiting farmers’ ability to save, store, exchange and replant patented as well as un-patented seeds.
8. How does the TPP shift power from states to corporations?
The TPP includes a powerful mechanism through which foreign corporations could shape the Canadian food system, called the Investor-State Dispute Settlement, or ISDS, for short. So, what is the ISDS and how does it work?
The ISDS is a mechanism included in the TTP and many other free trade agreements that allows investors to sue the governments of countries in which they invest if new national regulations interfere with expected trade profits. This dispute mechanism allows corporations to challenge public policies developed to safeguard our health, economy, environment and safety.
While the TPP is not designed to supersede existing regulations, the ISDS will make bringing in new regulations – such as GMO labelling, for example – even more challenging. Additionally, introducing legislation to protect domestic food systems and smallholder farmers could be considered a breach of the agreement, and with the threat of being sued via the ISDS, governments may have a huge disincentive to introduce such legislation to protect local food systems.
The way that the ISDS works is that claims are brought before a private arbitration tribunal outside of the domestic court system of the government being sued. As such, the mechanism fails to offer protections aimed at ensuring impartiality and fair outcomes that we’ve come to take for granted in our legal system. There is no appeal system or judicial review of the decisions from these tribunals. There is also nothing mimicking the structured selection or independence of judges. Of the three arbitrators, one is chosen by the challenged country, another by the investor, and the third by the other two arbitrators. These arbitrators are paid by the hour and can shift between roles in different cases, serving as an arbitrator in one and representing the investor in another.
The goal of the ISDS is investment protection, which according to proponents and the agreement’s text itself, is to “to encourage and promote the flow of investment…as a means to promote economic growth.” Yet the social costs of these potential gains – for example, costs to public health or the environment – could be significant.
Through the ISDS mechanism, foreign corporations are granted power to directly and indirectly undermine national food and agricultural standards. This shift in power from national governments to foreign corporations is of concern in regards to the ability to protect and control Canada’s food and agricultural systems.
9. How can Canadians protect their food sovereignty?
Before ratifying any trade deal, Canada should consider whether potential benefits of increased trade outweigh the risk of sacrificed control over our food and agricultural systems.
Moreover, by including the ISDS mechanism in the TPP, this agreement may offer even more power to foreign corporate investors. This begs the question of whether the TPP is really in the interest of all Canadians, or whether potential gains may be unequally distributed. As outlined above, the winners in this deal will likely be large agri-business and export oriented producers, while small-scale firms stand to lose. For consumers the expected impact is less clear, with potentially lower food prices but less control over the food they eat.
Specific policies that could help reduce risks presented by the TPP and other free-trade agreements include: greater transparency in both the negotiation and implementation stages of these trade agreements; strengthening national competition laws in order to keep market power imbalances in check; and including specific text relating to food and agriculture in trade agreements that protect small firms and national food regulations aimed at protecting the health and safety of all Canadians and their environment.
This explainer was written by a group of UBC graduate students as part of our Lind Initiative series on inequality.