DowChemical vs. Quebec

When Barack Obama made the commitment to re-open the North American Free Trade Agreement (NAFTA) during his presidential campaign, environmentalists' ears perked up. Under Chapter 11 of NAFTA, private companies have the ability to sue governments (even foreign ones) if they feel that the government is in any way hindering their products.

The logic is quite simple. By putting forth any regulation that may reduce the sales or presence of a corporation in any way, a government (federal, provincial or municipal) can be considered to be artificially expropriating (the mandatory removal of property) the corporation from the area. Operating in an area is essentially considered a right of the corporation and any harmful regulation requires adequate compensation.

Of course, if the regulation is put in place for an important reason, such as protecting people's health or protecting the environment, then the corporation doesn't have a case. The trouble begins when governments need to prove the product being regulated is harmful. This is what is going on in Quebec.

Roughly a decade ago, the town of Hudson, Quebec (pop. ~5000) banned the use of pesticides used for cosmetic purposes--such as fancying up your lawn or making your flowers look better than your neighbours'. After being challenged by a chemical company, the town's by-law was held up by the Supreme Court of Canada in 2001. Hudson's success launched a wave through Quebec, which finalized its ban on cosmetic pesticides in 2006, setting the standard for tough regulation on pesticides in North America.

Though wildly popular with the public, the chemical industry was less than enthusiastic. DowChemical, a multi-billion dollar chemical company is threatening to sue the Quebec government (though formally it has to go through the federal government) for $2M under Chapter 11 of NAFTA, citing that there is insignificant evidence proving the damage caused by the pesticides.

Both the federal government and Quebec are prepared to hold their ground. Good. Even though the Harper government is fairly weak when it comes to environmental policy, this is one worth fighting for. For one, letting Dow get through would set a dangerous precedent for companies to come in and claim more from the government, both in this case and future ones. Secondly, and probably most important from the Conservative government's perspective, is the firestorm that would be set off in Quebec if the feds stood on the sideline. Losing much of the Quebec vote was what kept Harper from grabbing the majority last October and the last thing he needs is another Quebec blunder.

Even though many of the claims brought on by companies against the Canadian governments under NAFTA are rejected, at least one has gotten through. In 1997 an American company, EthylCorp, challenged a Canadian regulation and was eventually awarded $13M (US) after a gasoline additive it provided was banned in Canada. This set a dangerous precedent. We don't need anymore.

Chapter 11 was one of the worst things to happen to environmental policy making in Canada. It severely limits the powers governments have over their own territory, which is dangerous for human health, the environment and Canadian sovereignty. This case better get dropped. Otherwise, any future Canadian environmental policy might simply be put on the "we're too scared to enact this" shelf. That would be scary.

Oh, and B-Rock, once you're done fixing the world's economy, repairing the American education and health care systems and figuring out that whole terrorism thing, please make good on your promise and fix this stupid agreement.