August 31, 2010

NAFTA Is Not Free Trade It Is Select Trade Especially When It Comes To Health Care

We should amend NAFTA or just throw it out completely

By Melvin J. Howard

The North American Free Trade Agreement (NAFTA) that was negotiated in 1993was suppose to broadened the free trade between the United States, Mexico and Canada. Chapter Eleven accords individual foreign investors and corporations the right to invoke international arbitration to claim damages arising from alleged wrong-doing by governments, public agencies, or Crown corporations, including actions which are alleged to have expropriated the investor’s property (“investor-State claims”).These claims are heard by and decided by international arbitral tribunals (“NATFA tribunals”).

Prior to this, a foreign investor would have had to establish the existence of an agreement with the nation state to submit a dispute to arbitration. In the absence of such agreement, the foreign investor’s only recourse would have been to the domestic courts and if that was not satisfactory, to intercession of his home state.

But American workers have lost nearly 900,000 jobs as a direct result of NAFTA, most of them in the high-paying manufacturing sector, according to the Economic Policy Institute. And since the implementation of NAFTA, the trade deficit with Canada and Mexico has surged from $9.1 billion in 1993 to $110.8 billion last year.

The United States the model of free trade, everyone from economists, consumer groups, financiers, and business leaders say free trade is good for the U.S. economy. I won't argue that but it is only good if all partners pull their weight other wise we become one big subsidy for other nations we have trade agreements with. NAFTA has often been accused for using bad arguments for short-term gains.

NAFTA is advertised as the world’s largest free trade area. The agreement between Canada, the U.S. and Mexico links 439 million people and produces $15.3 trillion in goods and services annually. But some critics say that the agreement has led to a net loss of 879,000 jobs in the U.S., and a decline in labor protection and degradation of the environment. On March 4, of this year US Congressman Gene Taylor (Dem. Mississippi) tabled a bill that would allow the US to pull out of NAFTA if six months notice was given to Canada and Mexico. Citing comparative data from before and after NAFTA was signed Taylor suggests that the US' trade deficit with Canada has increased too greatly from US $11 billion in 1993 to US $78 billion in 2008. Similarly, prior to the enactment of NAFTA, the US had a trade surplus with Mexico of US $1.7 billion, which became a trade deficit of US $75 billion in 2007. Taylor's bill has the support of 28 Congressional representatives, who also believe that NAFTA is harming US manufacturing jobs.

We should amend NAFTA or just throw it out completely and chalk it up as a lesson learned

Some say opening NAFTA to renegotiation would allow Mexico and Canada to address it complaints. I say so be, it I have a couple of my own which I will outline just a few of them here. NAFTA is fraught with conflicts, self-interests, non-consistencies and ad-hoc parties that have no experience on the issues of disputes. Which leaves big gaps in interpretation of the trade agreement. I will use an example of our NAFTA case against the Government of Canada to bring this point home. But first lets go back to school remember economics 101. Lets start with the trade deficit and why if it continues to go on continually it weakens our economy and our ability to stay competitive in international markets. As the U.S. loses competitiveness, it has even lower quality of jobs and the standard of living declines drastically. Lets face it I think everyone in the U.S. knows of a family member, friend or an associate who is out of work right now.

An ongoing trade deficit is also not good for the nation’s economy over the long term because it is financed with debt. In other words, the U.S. can buy more than it makes because the countries that it buys from are lending it the money. It is like your at a casino and you’ve run out of money, but the casino is willing to keep sending you playing chips on credit and put it on your tab. Of course, this can only go on as long as there are no other customers for this type of game in the casino, and the casino can afford to loan you the money. One day though the lending countries may decide to ask the U.S. to repay the debt.

Now lets take a look at how if the dollar continues to decline how it to affects the Trade Deficit. The dollar declined 40% against the euro in the last six years. This means that U.S. goods and services are 40% cheaper for Europeans, which makes U.S. companies more competitive, and increases exports. However, the recession offset this advantage, so that exports declined - from $1.6 trillion in 2007 to $1.5 trillion in 2009. (See The Value of the Dollar)The recession also lowered imports, which dropped from $2.3 trillion in 2007 to $1.9 in 2009. Also as the dollar declines, OPEC increases prices to maintain its revenue.

By purchasing goods overseas for a long enough period of time, U.S. companies lose the expertise and even the factories to make those products. When is the last time you found a pair of shoes made in the U.S.A? For years we could look the other way of our growing trade imbalance, because our strong position in the U.S. market always bailed us out but since the melt down of Wall Street that is no longer an option. Canada by comparison in the past always counted on the U.S. market to prop up their trade numbers because of NAFTA.

Lets look at some of the measures prohibited by NAFTA Chapter Eleven:

(a) accord foreign investors and their investments less favourable treatment than is accorded, in like circumstances, to a State-party’s own investors and to their investments (Article 1102);

(b) accord foreign investors and to their investments less favourable treatment than is accorded, in like circumstances, to investors from any other nation, or to their investments (Article 1103);

(c) not treat foreign investments in accordance with “international law including fair and equitable treatment and full protection and security” (Article 1105);

(d) impose administrative or regulatory requirements, such as obligations to source goods and services locally - as a condition on the right to establish or carry on investment activities (Article 1106);

(e) impose constraints on the right of foreign investors to choose senior managers and board members of any nationality (Article 1107);

(f) directly or indirectly “expropriates” an investment or represents a measure “tantamount to expropriation” (Article 1110). NAFTA, Articles 1102, 1103, 1105, 1106, 1110. Now doesn’t this sound all nice and cozy it’s suppose to give an investor a since of protection. In reality it is window dressing this I learned fist hand in our case. It does not take a group of intellectuals or great legal minds to see that Canada is discriminate of U.S. health care facilities. But yet Canadian health care companies are free to participate in the great American dream of competition in the U.S.

NAFTA investment rules are set out in Chapter Eleven of the Treaty, which is divided into three parts. Section A sets out the scope, coverage and substantive obligations of the NAFTA provisions concerning investment. Section B establishes the investor-State suit procedures, and Section C defines various terms relating to the rights and obligations delineated by this Chapter of the NAFTA.

NAFTA, Chapter Eleven

To bring a claim authorized by Chapter Eleven, a private individual or company must:

i) qualify as “an investor of a Party”;

ii) consent to arbitration; and

iii) waive their right to initiate or continue domestic judicial or administrative proceedings seeking damages in respect of the measure.

A disputing investor wishing to submit a claim to arbitration under Chapter Eleven of NAFTA is entitled to invoke one of three sets of arbitral rules:

The ICSID Convention provided that both the disputing Party and the Party of the investor are parties to the Convention;

The ICSID Additional Facility Rules provided that either the disputing Party or the Party of the investor, but not both, is a party to the ICSID Convention; or the UNCITRAL Arbitration Rules.

As I have mentioned in previous entries as of 2007, the International Centre for Settlement of Investment Disputes (“ICSID”) has been signed by 155 countries, of which 143 have proceeded to ratification. An investor can bring arbitration before ICSID only if the respondent state has also separately agreed to such arbitration. Such an agreement can be contained either in the contract between the investor and the state or, and this is most often the case, in a bilateral investment treaty between the respondent state and the investor’s home state. ICSID awards cannot be set aside before national courts and have to be treated by each member state as if they were a final judgment of its courts. Awards can, however, be set aside by so-called ICSID ad hoc committees. The number of ICSID arbitrations has increased exponentially in the last few years. In July 2007, ICSID had concluded a total of 125 cases, and had 111 pending cases.

However, Canada has not ratified the ICSID yet. Considering Canada has not ratified the ICSID, any recourse must be made to either the Additional Facility Rules of ICSID or the ad hoc United Nations Commission on International Trade Law (“UNCITRAL”) Rules. However, awards can be set aside under these instruments, meaning that until Canada’s ultimate ratification, NAFTA Chapter 11 arbitration under the ICSID Convention remains unavailable to both Canadian investors in the United States and American investors in Canada. As an investor, I would have to ask myself, why would I want to go to arbitration knowing that if we are to win, the award can be challenged in a formal court. By Canada not signing the ICSID treaty that is the roll of the dice you take with U.S. companies arbitrating under NAFTA.

Arbitral proceedings are generally held in camera i.e. private, and the confidentiality of the arbitral process is seen as one of its most important advantages. Indeed, the importance of secrecy to the arbitral process is expressly acknowledged by international commercial arbitration rules which provide, for example, that “Deliberations of the Tribunal shall take place in private and remain secret,” or that “Hearings shall be held in camera unless the parties agree otherwise”. We never got that far and for good reason there was a conflict before we ever got started. I would not agree to any such agreement until this issue was resolved and that is why I am free to talk about this openly. Here is why conflicts must be resolved quickly especially if it is a sitting arbitrator.

NAFTA tribunals are free to interpret the provisions of NAFTA as they see fit as no doctrine of stare decisis or binding judicial precedent constrains the exercise of their authority. Also unlike courts, arbitral panels lack the quality of judicial independence. Thus, in addition to being appointed by the parties, arbitrators may play various roles from proceeding to proceeding - serving as the president of a tribunal convened to interpret NAFTA rules on one occasion, and as a party’s nominee or advocate on another.

This lack of independence is suspect I have raised questions about the objectivity of arbitrators, in the past and for the potential for self-interest to influence the approach taken by adjudicators to the issues that comes before them. In my case that is so evident you have to be blind not to see that.

Under Chapter Eleven, the Parties are required to provide for the enforcement of an arbitral award in their respective countries. Disputing investors are authorized to seek enforcement of an arbitration award in any jurisdiction that is a party to international conventions established to provide for the recognition and enforcement of foreign arbitral awards, namely the New York Convention. Under NAFTA, judicial review of arbitral awards, and judicial supervision of arbitral tribunals, is vested exclusively in the jurisdiction named as the place of arbitration, which may be in any nation that has ratified the New York Convention. The scope for judicial review is not determined by NAFTA or by the arbitral regimes it invokes, but rather by the law of that jurisdiction. It is that jurisdiction, and that jurisdiction only, that determines the procedures and substantive grounds upon which an arbitral award may be set aside. Now watch closely ladies and gentlemen you’re about to witness the greatest slight of hand since Houdini.

On August 9th 2010 I received a correction of an order and it quotes “ the phrase “considering the Disputing Parties’ agreement that the first procedural meeting be held at the premises of the PCA in The Hague” shall be struck and replaced with the phrase “taking note of the absence of an agreement between the Parties as to the place of arbitration”; the words “The Hague, the Netherlands” shall be struck and replaced with the words Toronto, Canada. See what happen ladies and Gentlemen with just a quick pen stroke they gave Toronto Canada jurisdiction without even the standard argument on jurisdiction needless to say I have a big problem with that.

The only other opportunity for judicial oversight of an arbitral award arises when enforcement proceedings are brought in a particular jurisdiction. When this happens, a court may refuse enforcement. Here is my problem with the jurisdiction issue its Toronto Canada how fair would they be. From my vantage point and past experiences I would not trust that I would get the kind of impartiality that is required.

Where the disputing parties agree, the place of arbitration may be in any of the more than 100 nations that are parties to the New York Convention. What happens to parties if they disagree exactly I was stripped of that opportunity? The reason jurisdiction is so important is because we made the claim against Canada, if the place of arbitration were chosen to be in U.S., Canadian courts have no authority to review the award.

I can as an investor invoke Chapter Eleven procedures “to challenge judicial determinations made by the courts of a NAFTA Party. Other words I can call for an international arbitral review on the judgments of Canadian superior courts. If by now you can’t tell this is about politics instead of health care let me take you back to September 13, 2003.

Under Article 1110 of NAFTA, foreign investors can claim damages where it is alleged that some policy, law or regulation of a Party “directly or indirectly expropriated an investment” or was a measure “tantamount to expropriation of such an investment.” Lets expand on that further in my case.

As per my revised statement and claim on September 13, 2003 The Investor through its Canadian subsidiary was to create it's own Diagnostic Imaging Facilities and Preventative Health Centres around the Ultrafast EBT Scanner technology. Through its wholly owned subsidiary Holy Cross Heart and Health Center Ltd., the Diagnostic Imaging Clinic was to be situated in a leased premise in Calgary, Alberta. The specific location is at the Holy Cross Hospital Centre, 2310-2 Street SW. Through the actions of the Government of Canada the Investor was denied its right to do business in Canada. Canada has breached NAFTA Article 1110 through its general conduct it allowed the expropriation of the Investor’s health care technology. In so doing Canada failed to treat the investment in accordance with international law. By the actions of the Canadian Government and its complicit behavior and ambivalent actions in regards to the enforcement of the Canada Health Act. Led towards the Investor’s medically technology to be shipped back to the U.S. for a major loss. The Canadian Government through the media and other government outlets. Had stated that if the EBT center was allowed to be erected and operated that the Government would penalize the Province for breach of the Canada Health Act. At this time no action has ever taken place. This constitutes an expropriation or a measure tantamount to expropriation under NAFTA. In so much as international law is concerned this occurs when a state does not take property outright but applies measures that have the same effect.

The Investor asserts that the facts pleaded with respect to Canada’s breach of NAFTA Article 1102 constitutes a breach of the international law standard of treatment, including fair and equitable treatment, under NAFTA Article 1105. Such claims are so incorporated into this part of the Investor’s Claim to the extent that they do not assert an independent breach of anti-competitive conduct per se.

The Investor and its enterprises have suffered harm, loss and damage, including but not limited to competitive disadvantage, loss profit, reduced market share, and increased out of pocket expense both for its medical technology and its proposed surgical facility.

Canada’s Obligations under Chapter 15 NAFTA Article 1502(3)(a) and 1503(2). Under NAFTA Article 1502(3)(a) Canada is obliged to ensure that its municipalities and regional health authorities acts in a manner that is not inconsistent with Canada’s obligations under NAFTA whenever Canada exercises any governmental authority that Canada has delegated to its entities. Basically Canada took our money and gave us the Royal international finger.

Investor-State litigation must be understood in the context of a trade agreement that has characteristics that are “constitutional” in nature because it represents a form of pre-commitments that binds future governments, it is difficult to amend, and is binding politically and, in some cases, judicially as well. For instance what one of the members of the NAFTA tribunal in the S.D. Myers arbitration noted in his concurring opinion that trade agreements like NAFTA “have an enormous impact on public affairs in many countries.” He went on to liken these agreements to “a country’s constitution,” because “They restrict the ways in which governments can act,” he writes, “and they are very hard to change. Nowhere is that more evident then the Universal health care system in Canada. Especially the term private health and the reason I say the term private health care because it can mean many things. But in this case I mean Private Surgical Centers yet Canada has had private health and surgical facilities for decades. It’s only when you introduce U.S. health care facilities to the mix you get oh no we can’t have U.S. health care facilities in Canada. I say what a load of crap I have heard this same argument for over 11 years it is merit-less.

Unlike dispute resolution under the World Trade Organization, which provides for the review of trade panel decisions by an appellate body comprised of permanent members, there is no formal institutional structure to be taken by NAFTA arbitral tribunals. The result to date has been a body of final cases, which interpreted by NAFTA rules in a manner that has varied considerably from case to case. NAFTA is administered all by lawyers. No sitting judges no permanent body for appeal etc. They act as your judge, jury and since we are talking about money your money the executioner. As pointed out by a leading Canadian trade lawyer in a report prepared for the Romanow Commission, NAFTA investor-State claims are now an obstacle to expanding the publicly funded health care system. But here is what he left out what about the expansion of private health care that has already exist in Canada.

This begs the question what good are binding international agreements concerning investment if you don’t play by the rules. Are these agreements significant in facilitating or attracting foreign investment that can be argued? Again I state this has reduced the NAFTA process as pure politics. I am not naive like some are in thinking this argument was purely about health care. That was just a ruse used by my opposition that were opposed to me bringing this claim it was meant to confuse and scare. Lets face it when you are right the only weapon your opponent can use is scare tactics.

The only purpose of NAFTA tribunals is to enforce the specific investor rights contained in Chapter Eleven; they do not play any other role in relation to the broader context of NAFTA rights and obligations outside Chapter Eleven. Moreover, rather than being a permanent regulatory body exercising extra judicial administrative and regulatory functions based on accumulated institutional experience and expertise, NAFTA tribunals are ad hoc in nature, and engage only exist for the purpose of judicially resolving disputes.

Chapter Eleven allows the Canadian government to evade judicial review by U.S. courts through the simple device of choosing a location for the arbitration outside of the U.S.A. NAFTA tribunals themselves have determined to locate arbitration outside of the U.S.A. in order to avoid judicial review by U.S. courts. Further under NAFTA executive accountability is not to legal authority, but to arbitral tribunals, which are themselves subject to no supervision by any courts, particularly where, the place of arbitration is outside the U.S. What happens when NAFTA tribunals are asked to interpret US constitutional law?

Judicial independence is essential in any legal proceedings NAFTA lacks this. Arbitrators play various roles from proceeding to proceeding serving as the president of a tribunal convened to interpret NAFTA decisions in one proceeding, as a party’s nominee in another, and as an advocate in yet another proceeding. This structure allows for the possibility that an adjudicator, seeking to attract or maintain a particular client base, would be influenced to render decisions that favour the interests of this constituency.

This lack of separation between adjudicative and advocacy roles gives rise to a reasonable doubt. If you look at my case you would have no doubt that there is doubt. Effectively Canada took my money my family’s money and my shareholders money under the guise of free trade. At the same time demanding concession from the U.S. in the Buy-American legislation that was passed recently have you no shame?

Oh and speaking of doubt whatever happened to that lawsuit featuring the Canadian private surgical clinics against the Government of British Columbia. Your honor if it pleases the court of world opinion I would like to submit the lawsuit filed in British Columbia Canada as exhibit “H” for Hypocrisy

Now a bipartisan Bill to get behind:


2d Session

H. R. 4759

To provide for the withdrawal of the United States from the North American Free Trade Agreement.


March 4, 2010

Mr. TAYLOR (for himself, Mr. JONES, Mr. DEFAZIO, Mr. STUPAK, Mr. ARCURI, Mr. BACA, Mr. BARTLETT, Mr. BRALEY of Iowa, Mr. CAPUANO, Mr. COSTELLO, Mr. FILNER, Mr. GRIJALVA, Mr. HARE, Mr. HINCHEY, Mr. KAGEN, Ms. KAPTUR, Mr. KILDEE, Mr. KISSELL, Mr. KUCINICH, Mr. MASSA, Mr. MCINTYRE, Mr. MICHAUD, Mr. PAUL, Mr. SCHAUER, Mr. VISCLOSKY, Mr. WILSON of Ohio, Ms. WOOLSEY, and Mr. STARK) introduced the following bill; which was referred to the Committee on Ways and Means


To provide for the withdrawal of the United States from the North American Free Trade Agreement.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,


(a) Withdrawal of Approval- Notwithstanding any other provision of law, the approval of the NAFTA by the Congress provided for in section 101(a) of the North American Free Trade Agreement Implementation Act shall cease to be effective beginning on the date that is six months after the date of the enactment of this Act.

(b) Notification of Withdrawal- On the date of the enactment of this Act, the President shall provide to the Governments of Canada and Mexico written notice of withdrawal of the United States from the NAFTA in accordance with Article 2205 of the NAFTA.

(c) NAFTA Defined- In this section, the term `NAFTA' means the North American Free Trade Agreement entered into between the United States, Canada, and Mexico on December 17, 1992.

This Bill is not a Democrat or Republican Bill it is an American Bill with very American issues. It should not be put on the back burner I implore Congress the sponsor and co-sponsors of this Bill to see it through.


Melvin J. Howard