The TILMA papers

The CCPA released two papers today on the Trade, Investment and Labour Mobility Agreement, one by Ellen Gould that looks at the potential risks posed by the deal’s sweeping language, and a second by myself and Erin Weir, on the contrived economic case made for TILMA. Both papers can be downloaded here.

Below is the press release, which provides a summary of the two papers together. TILMA is not yet in effect and there is still time to kill it; hopefully, our papers will provide some sober second thought on the deal for both BC and Alberta, and will stop other provinces from foolishly signing on. The grapevine says that Ontario wants in on the deal, while Saskatchewan and Manitoba are reluctant.

What I would like to see is an actual list of problems that need to be solved, something that, remarkably, has been absent from these discussions. I am open to looking at things on a case-by-case basis and solving real problems as long as they do not compromise social or environmental standards.

TILMA tapes a sign to our backs that says “sue me”. It is fundamentally at odds with, for example, BC’s newfound religion on climate change, which inevitably must call for regulations to reduce C02 emissions. Oil and gas companies in Alberta will definitely have their bottom lines hit, and TILMA gives them a mechanism to sue the BC government, and one that is outside our established judiciary. It allows trade lawyers to second-guess democratic decision-making (“judicial activism” without real judges).

What is so alarming to me is how shoddy the economic case is for TILMA – the economic benefit numbers touted by the Conference Board are almost one hundred times higher than what the (albeit limited) economic literature tells us. Having looked more closely at their study for the BC government, we find that they are essentially making up their numbers. No wonder this study was kept secret for so long.

The BC and Alberta governments should not implement the Trade, Investment and Labour Mobility Agreement (TILMA), according to two new studies from the Canadian Centre for Policy Alternatives. TILMA is scheduled to come into effect on April 1, 2007.

The agreement is being promoted as a fairly innocuous deal that will ease the flow of trade and labour. In reality, it grants sweeping investor rights that could compromise provincial health, safety and environmental standards. The Harper government is aggressively promoting the deal to all provinces as part of its deregulation agenda.

The CCPA studies find that risks associated with the agreement greatly exceed any economic benefits. Of particular concern are provisions that allow corporations to sue governments over any measure that “restricts or impairs” their investment, with up to $5 million available for compensation for each alleged violation.

The first study, Asking for Trouble, by Ellen Gould, carefully compares the legal language of TILMA to existing provincial regulations and public enterprises. She finds numerous examples where democratic decision-making could be second-guessed, or important public policies overruled.

“This agreement is extremely broad. It will create pressure to deregulate in important areas of public policy,” says Gould. “The true meaning of its provisions will not be fully understood until the limits are tested by dispute panels.”

Gould says municipal planning regulations (such as heritage conservation and building height restrictions), environmental protection measures, and efforts to restrict private health care could run afoul of TILMA. The agreement does allow a handful of exceptions, but they are very limited.

Supporters of TILMA, in particular the Conference Board of Canada, claim it will boost provincial economies by eliminating barriers to internal trade. The Conference Board recently published a report endorsing TILMA that was commissioned by the BC government.

However, a second CCPA study shows that there are actually very few obstacles to inter-provincial trade and labour mobility. The Myth of Interprovincial Trade Barriers and TILMA’s Alleged Economic Benefits, by Marc Lee and Erin Weir, argues that business groups are falsely claiming that differences in public interest regulation amount to “trade barriers.”

“There is no evidence that differences in regulation result in significant economic costs,” says Lee, a Senior Economist at the CCPA. “Research on interprovincial barriers finds that they cost less than one-twentieth of one percent of Gross Domestic Product.”

The Conference Board report, however, makes the grossly inflated claim that gains to BC would be almost one hundred times that amount. The BC government has relied on that report as its principal evidence in support of TILMA. Lee and Weir note that the Conference Board makes no attempt to list, or estimate the cost of, trade barriers between provinces. And rather than using standard techniques of economic analysis, the Conference Board infers huge benefits on the dubious basis of a tiny survey of business organizations and government ministries.

Furthermore, the Conference Board doubles its estimate of TILMA’s benefits through a simple arithmetic error. Even after correcting this error, most of the projected gains are from industries exempt from the final agreement or from industries that barely engage in interprovincial trade.

Both CCPA studies recommend that TILMA not be implemented in BC and Alberta, and that other provinces resist pressure to sign on. Any real barriers to trade and labour mobility should instead be dealt with on a pragmatic case-by-case basis, rather than through TILMA’s sweeping and dangerous legalistic approach.