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The Progressive Economics Forum

Stop Trump copy-cats: Listen to workers

I presented at the Standing Committee on International Trade’s incredibly brief review of the implementing legislation for CETA. With me were representatives from the Business Council of Canada, the Chamber of Commerce, and the Canadian Cattleman’s Association. There are only two more meetings scheduled, and there are no IP experts, no pharmaceutical experts, no representatives from either our shipping industry or labour groups representing seafarers. There were no representatives from municipalities, even though CETA is the first deal to apply at that level of government, and more than 50 municipalities have asked to be carved out of the deal. This is hardly a shining example of how to govern inclusively, transparently, or progressively.

To make matters worse, several presenters indicated that they thought CETA was the answer to global dissatisfaction with trade and investment deals.

This concerned me so much that I strayed from my prepared remarks to inform them that economists such as Dani Rodrik and Thomas Picketty have warned about the inequality that can arise from trade treaties, and that the government would be wise to listen carefully to well-founded critiques of deals such as CETA. Pretending that everything is OK, only listening to advice from those who clearly stand to benefit from this deal, and writing off the rest of us as protectionist or xenophobic – well, that is one of the elements behind Trump’s rise, and it will fuel the rise of the far-right in Europe as well.

In the interest of vibrant public debate, I post my remarks to the committee here:

The labour movement is keenly aware that trade is, and has always been, an important feature of the Canadian economy.  We understand that all governments have an interest in fostering open trade.

Distributional impacts from trade and investment agreements have long been ignored. We are told that trade deals will have winners and losers, but don’t worry, we can compensate the losers. Historically, Canada has done an inadequate job on this front.

And the gains from these deals are never as big as they were projected to be, especially for recent trade and investment agreements. The main gains from open trade comes from reducing tariffs, and much of this was accomplished by the 1990’s. So-called modern trade deals are often more about advancing investor rights. As such, they do not necessarily increase trade, improve economies, or benefit Canadians.

CETA also goes farther than existing trade deals by putting restrictions on local governments. This is despite the fact that more than 50 communities, including Toronto, Victoria, Baie Comeau, Sackville, Hamilton and Red Deer, have already sent a clear message to federal and provincial governments that “buy local” and other public spending policies, as well as municipally-delivered public services, should be excluded from CETA.

Pharmaceutical Patents

While we’re sold free trade deals on the opportunities for Canadian business, and the savings for Canadian consumers, the majority of this 140-page bill features changes to Canada’s intellectual property rules, requiring changes that largely serve European interests.

One of the biggest concerns regarding CETA is the impact on Canada’s health care system. On a per capita basis, Canadian drug costs are already among the highest in the world – only exceeded by the United States – and are among the fastest rising among comparable nations.

Bill C-30 devotes fully 30 pages of amendments to the Patent Act. These ammendments will further exacerbate the rise in costs by:

  • Committing Canada to creating a new system of patent term restoration thereby delaying entry of generic medicines by up to two years;
  • Locking in Canada’s current term of data protection, and creating barriers for future governments wanting to reverse it;
  • Implementing a new right of appeal under the patent linkage system that will create further delays for the entry of generics.

Analysis conducted by Prof. Marc Andre Gagnon and Dr. Joel Lexchin estimates that CETA’s provisions will increase Canadian drug costs by between 6.2% and 12.9% starting in 2023. This is in line with internal government estimates that expected the patent changes to cost between $1B to $2B per year, and the generic industry’s own research that put the price at $3B.

The previous federal government committed to compensating provinces for this increase in cost, but that simply means that the federal government will ask Canadians to pay pharmaceutical companies through higher taxes or cuts to services elsewhere. It also doesn’t take into account that some of this increased cost will fall directly on low income workers who don’t have drug plans. As Lexchin and Gagnon point out in their paper: “cost-related nonadherence is 35% among people with low income and no insurance.”  What this means in real life is that people sometimes won’t even go to the doctor for their illness, because they know they can’t afford the cost of a prescription.

In fact the new legislation on pharmaceuticals found in C-30 are a very good example of what is wrong with the out-dated approach being pursued through CETA.

In 1987, the federal government made a bargain with pharmaceutical companies. They passed legislation strengthening patent protection for drugs, and in return pharmaceutical companies committed to increase their R&D investment in Canada to 10% of sales.

Since 2003 companies have failed to meet this target, and as of June 2016 the Patented Medicine Prices Review Board (PMPRB) reports that R&D investment in Canada is at 5% of sales. Investment in a group of 7 comparable countries, including EU countries France, Italy, Sweden and Germany, has held steady at 20% of sales.

So now we are again strengthening patent terms for large pharmaceutical companies, but this time we’re not even asking for assurances of investment in R&D. Why does anyone think the answer to failed neoliberal policies is simply more neoliberal policy?

It is clear that the largest single impact resulting from CETA will be on prescription drugs and there is no clear benefit to Canada from these changes as CETA will only affect drug costs in Canada—not the EU. As well, many EU nations have regulated prices in order to maintain affordability. We are told that nothing in CETA prevents Canada from regulating drug prices either, but we see no indication that the federal government intends to take action on this front.

Coasting Trade Act

Wages and working conditions vary greatly in the global shipping industry, and in recognition of that Canada and the U.S. have placed significant restrictions on the operation of international shipping within Canada. These protections are called cabotage, and are outlined in the Coasting Trade Act.

Bill C-30 undermines cabotage in three ways:

  • Government dredging projects with a value of over 7.8 million dollars will become open to bidding by vessels built and registered in the EU. However, private dredging projects will become open to bidding by EU companies using vessels of any flag.
  • EU companies will be permitted to use a ship of any flag to move empty shipping containers within Canada. This work was normally done by rail in Canada, and it is unclear what the impact will be on those rail workers.
  • EU-registered vessels will be permitted to establish a scheduled feeder service of cargo between the ports of Montreal and Halifax only. (Feeder service is the domestic portion of any international import/export from abroad – not just between Canada and EU countries).
  • Additionally, EU-vessels under “second-registry” will be permitted to perform the same type of service between Montreal and Halifax only if they are on the continuation-leg of their international voyage.

Our position is that this cargo should have remained subject to cabotage rules – i.e. Canadian-flag vessels and Canadian jobs. These protections were in place for a reason, to protect wages and working conditions for all workers in the industry.

Some EU nations such as Cyprus are flags of convenience, but you may not know that all registries in the EU allow for open crewing and the wages paid are shockingly low, and the hours long.  I asked my colleagues at the International Transport Workers Federation (ITF), and the Seafarers International Union of Canada what this means for workers, and they gave me some examples.

The standard work week is 44 hours, plus 85 hours of overtime per month at a fixed wage – that adds up to 276 hours per month. The ILO minimum for a worker at the rank of Able Seaman would be $670 USD per month, including leave pay. This works out to less than $2.50 / hr. Overtime pay on top of that is $3.56 per hour. Ordinary Seaman, or Deck Trainees sometime see wages that work out to only $1.26 per hour. (The ITF posts ILO minimum wages on their webpage.)

On Canadian ships in Canadian waters, wages are much higher. Entry level positions such as Ordinary Seaman start at $20 / hr, with an Able Seaman earning closer to $26 / hr.

You can clearly see that EU wages are in no way comparable to the Canadian reality. This is bad for the workers on the EU vessels doing this work, bad for Canadian workers being displaced, and bad for Canadian companies who cannot compete with such low standards.

The answer to these problems isn’t pretending that they don’t exist. The answer is to listen to more voices, have healthy open debate, and to take action to compensate those who lose out from globalization.

 

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