Murray Dobbin: Here’s hoping the Liberals really will rethink free trade, low corporate taxes

Murray Dobbin, Special to Financial Post | May 5, 2016 11:16 AM ET

If the federal Liberal government is on the verge of a major shift in economic and industrial policies, as Terence Corcoran suggests in his April 20 column, “Ghosts of business past — and future,” then all that can be said is thank goodness.

Since the mid-1990s Canada has basically been without any coherent or deliberate industrial policy, as federal governments embraced the ideological lunacy of “getting out of the way of business.” That meant leaving one of the most important processes in any country — capital allocation — in the hands of individual CEOs all acting in their own narrow interests. That approach was vigorously promoted by the Business Council of Canada, the group that Corcoran’s column focuses on. (It was originally called the Business Council on National Issues, but was renamed for awhile the Council of Chief Executives, and I always wanted to ask their former president, Tom d’Aquino if they changed it because they realized that, as far as they were concerned, there were no national issues.)

As Corcoran states, the organization successfully pursued a number of key fiscal and economic policies in the 1980s and ’90s including “free trade,” slashing corporate taxes, labour flexibility and balanced budgets. So, not only was government removed as manager of the economy, it also radically reduced its own spending capacity through draconian tax cuts for high-income earners and corporations (former finance minister Paul Martin cut $100 billion over five years; Jim Flaherty cut $60 billion over three years, and lopped two points off the GST).

Actually, it is not quite accurate to say there was no economic policy. There was one: more and more trade agreements (the domestic economy — accounting for nearly 80 per cent of GDP — was simply ignored). But these treaties have never accomplished what they set out to do.

Even its strongest promoters knew the Canada-U.S. Free Trade Agreement (FTA) was a leap of faith. Peter Nicholson, a free trade guru, former Scotiabank vice-president and later a personal adviser to Martin, acknowledged that supporters of the FTA thought it would “cause Canadian firms to pull up their socks … and compete in the North American market.” Instead, Nicholson lamented, many companies adjusted to the FTA “by simply moving across the border … taking the path of least resistance.”

Or by selling out to the highest bidder. Foreign direct investment soared but, on average, over 95 per cent of it went to buying up Canadian companies. Meanwhile, a 1997 study by Industry Canada concluded, “the impact of (free trade) after controlling for other variables on Canadian exports to the U.S. was modest, (just) nine per cent… the strong U.S. economic expansion and the real exchange rate were mainly responsible for the large expansion of Canadian exports to the U.S. in the 1990s.”

What those promoting the Business Council’s policies either neglected or simply failed to understand is that Canadian corporate culture is chronically risk-averse and fails time and again to invest in new technology, management techniques, or research and development — things that actually increase productivity and make companies competitive.

Two separate studies on competitiveness by Harvard Business School’s Michael E. Porter concluded that “The U.S. is just much more entrepreneurial … Research uncovered key weaknesses in the sophistication of (Canadian) company operations and strategy.”

Porter observed that, where Canadian companies did compete successfully, it was on the basis of cheap labour and access to natural resources. Cheap labour came courtesy of the Chrétien government’s brutal labour flexibility policies: slashing eligibility for unemployment benefits, killing the Canada Assistance Plan, and maintaining punitively high interest rates through most of the 1990s — keeping unemployment above nine per cent for most of the decade.

Canada’s free-trade treaties have never accomplished what they set out to do.

The results of these policies and their continuation under the Conservatives are glaringly obvious today. Cheap labour and ridiculously low corporate taxes have resulted in the accumulation of $650 billion of idle capital “allocated” to corporate bank accounts rather than productive investment. Tax cuts have depleted federal coffers of over $50 billion a year that could be used in ways to actually create an innovation-based economy. Meanwhile, any economic stimulus consumers might offer is restricted by wages and salaries that have stayed flat since the early 1980s, with our economy kept afloat by the most indebted population in Canadian history.

So what’s the endpoint of the Business Council’s policy preferences? Corporations have capital and won’t spend it; the government, starved of capital, can’t spend; and workers, deprived of their share of productivity increases, have no discretionary income to spend. But how’s that trade policy working out? The trade deficit from October 2014 to October 2015 reached $17.4 billion — the worst one-year total on record. With a record like that it’s no wonder the CEOs keep changing the name of their organization.

It would be interesting to listen to an analysis of our economy by the Liberals’ new guru, Dominic Barton, who, Corcoran says, likes big government with big ideas. Barton is fond of lessons from South Korea and China. They can make capital-allocation decisions on a dime. China became the world’s largest producer of solar panels and windmills in less than 10 years because it could make big decisions virtually overnight. Of course it helps when you have an authoritarian regime or an outright dictatorship.

Nonetheless, the Canadian government needs to get a grip on its own reality. First, by rejecting the idiotic “trade” agreements that make industrial policies increasingly difficult. Then, it has to recognize that having faith in Canadian corporations to provide leadership on their own has proven to be a monumental failure and that only with an aggressively activist government can Canada join other developed countries in creating the new economy. Lastly, Trudeau and his new guru will have to deal with the fact that, without replacing revenue lost through almost two decades of irrational tax cuts, rebuilding the Canadian economy will be almost impossible.


Saudi arms deal signals Mideast policy betryal

It is difficult to predict what kind of misstep can seriously tarnish a government’s reputation. Some mistakes have legs and others, inexplicably, don’t.

But the stunningly stupid decision to go ahead with a $15-billion sale of light-armoured vehicles (LAVs) to Saudi Arabia has the potential to expose Prime Minister Justin Trudeau as a phony.

You could hardly design an issue so perfectly fitted to reveal a government with a progressive public face contradicted by a ruthless disregard for human rights. It raises the question of whether the spin doctors simply misjudged the extent of public revulsion or whether there is something deeper going on. Is it really just about jobs or is there a hard-nosed commitment, inherited from the Conservatives, to a backward Middle East foreign policy?

Foreign Affairs Minister Stéphane Dion has been severely damaged by his performance on the Saudi arms sale file. First he said the government couldn’t get out of the contract, claiming it was legally committed by the Conservative government’s actions. That was not true.

Dion compounded his credibility problem with another misleading claim that he was following Canadian law in signing the export permits.

After a Globe and Mail editorial accused him of hypocrisy for approving the sale, Dion attacked the newspaper, claiming that “the Foreign Affairs Minister may block the exports permits at any time if there were serious evidence of misuse of the military equipment.” That is, presumably, after our LAV’s have been used to attack civilians.

But in fact the export control guidelines don’t refer to “serious misuse” but to whether “there is no reasonable risk that the goods might be used against the civilian population.”

Saudi Arabia’s hideous human rights record is amongst the worst of the worst. And in fact the Saudi government has used exactly this kind of armoured vehicle against its own dissenting citizens.

According to Belkis Wille, Yemen researcher for Human Rights Watch, “The Saudis have used such vehicles to violently suppress peaceful protests in eastern Saudi Arabia in 2011 and 2012.”

Is there a “reasonable risk” that it will do so again? Everything we know about the new and far more aggressive regime in Riyadh today says yes. In January the regime executed 47 prisoners (most by beheading) on a single day. The regime executed 151 in 2015 — the most in 20 years.

The Saudi government described those on Jan. 2 executed as “terrorists,” but the law defining terrorism includes anyone who demands reform, exposes corruption or otherwise engages in dissent or violence against the government. We don’t know how many were executed for acts of violence and how many for “dissent.”

The arms sales guidelines aim to protect the civilian population of the country buying the weapons. But surely the Trudeau government should consider the use of its exports against civilians anywhere to be a human rights deal-breaker.

Saudi Arabia’s brutal bombing campaign in Yemen against the Houthi rebels has sparked outrage in most Western capitals. The United Nations Panel of Experts on Yemen “documented 119 coalition [bombing] sorties relation to violations” of the laws of war.

It is precisely this situation that has prompted Canada’s allies in the European Parliament “to launch an initiative aimed at imposing an EU arms embargo against Saudi Arabia.”

Dion and his boss would like us to believe that Saudi Arabia’s total disregard for civilian lives and its targeting of medical facilities in Yemen (a possible war crime) are irrelevant when it comes to signing arms exports permits.

But many governments, international agencies and NGOs disagree. In swimming against the international tide Dion’s new foreign policy philosophy — “responsible conviction” — might better be called “conviction when convenient.”

But putting all this down to a botched political calculation regarding Canadian jobs is not very convincing. Does this ugly bit of Trudeau policy reveal something more substantive? What does it say about the government’s overall Middle East policy?

One of the reasons Dion has given for the arms sale is that Saudi Arabia is an ally in the fight against Islamic extremism. But anyone with knowledge of its roots knows that Saudi Arabia is the motherland when it comes to radical Islam. Right now in the U.S. there is a fierce debate about whether to release a secret 28-page section of a 2002 congressional report on 9/11, dealing with possible involvement of elements of the Saudi regime in the terror attacks.

While it is still early days in the Trudeau government, signs of a significant shift in Mideast policy are still nowhere to be seen. A 2013 assessment of Trudeau’s likely approach to the Israeli-Palestinian conflict suggested major shifts in balancing the interests of the two sides. But so far Canada’s support for Israel seems unwavering.

Trudeau supported a Conservative resolution that would have the government “condemn” any advocacy for the BDS (boycott, divest, sanction) campaign for Palestinian rights. He also opposes the European Union’s new initiative that require products from Israeli settlements in the occupied Palestinian territories to be clearly labeled. And there seems to be little if any movement on Trudeau’s commitment to re-engage with Iran.

In short, so far, Trudeau’s Mideast policy looks disturbingly like Harper’s.

While policies supporting both Israel and Saudi Arabia may seem contradictory, they are in fact quite consistent. The two countries share a number of common enemies, including Shia Islam, Iran, pan-Arab nationalism, the Assad regime in Syria, and Hezbollah. They are also the most vociferous regional opponents of U.S. and EU efforts at achieving a rapprochement with Iran. If Canada doesn’t move on its pledges of policy change, it will find itself increasingly at odds with the U.S. and EU. At no time in the past three decades has the tension between the U.S. and Israel and Saudi Arabia, its two principal Middle East allies, been greater.

One way for Dion to indicate he’s not offside on rebalancing Canada’s Mideast policy would be to end his self-righteous posturing on the Saudi arms deal and reverse the export permits.


If Mulcair Survives Next Week’s Review, the NDP Is Doomed

Can the NDP see the writing on the wall? More than 1,500 delegates will be heading to the federal NDP’s Edmonton convention next Friday. Do they realize how critical their vote on their party leader will be?

If delegates recognize that the party faces an existential crisis, they will reject Thomas Mulcair and confront the hard reality that Justin Trudeau is making the NDP irrelevant.

It’s an intriguing paradigm shift. For 10 years, Stephen Harper fantasized about condemning the Liberal party to irrelevancy. Now the Liberals are in a position to destroy the NDP, sending the party, like Social Credit, into the dustbin of history.

The chances that the party can find its way out of this crisis are slim. Getting rid of Mulcair is just one step. The party would still have to find a new leader who embodies the social democratic values of the founders of the CCF/NDP. That will be hard, because the process requires a politically engaged membership who actually own their own party.

And that’s a problem, one that goes back to when the CCF — the Co-operative Commonwealth Federation — joined with the labour movement to form the NDP in 1961.

That’s when the party embraced professionals to run what had been a genuine movement. For the last 55 years, members have become increasingly marginalized, called upon only to donate and knock on doors during election campaigns. That approach reached its apex under Jack Layton and Tom Mulcair.

Now the NDP has to grapple with a disastrous situation. Party members made a deal with the devil when they chose a conservative autocrat as leader — one who now apparently believes he can lead the party to victory into the next election.

It’s amazing Mulcair has not been called to account for his post-election musings denying that he or anyone in the NDP hierarchy is responsible for the party’s disastrous drubbing. First, the official party messaging argued the only reason the NDP did so badly was its principled stand on the niqab issue (though Trudeau took a similar position). Then the party reminded members that despite the loss of opposition status and over half the NDP’s seats, the outcome was the party’s “second-best result” ever.

Mulcair finally faced the national media three months after the election on Jan 18. He wanted to talk policy, but the media wanted to know about his future.

“It wasn’t there for us this time,” Mulcair said. “As a team, we haven’t been to the finals very often, and I can tell you that we learned a lot. Next time, we’ll be there to get the cup.”

Seriously? A hockey analogy? “Next time” isn’t the game next week, it’s four years away.

And it’s notable that the response was in the passive voice: “It wasn’t there for us.” What we didn’t hear, and should have, was “We completely bungled the election and betrayed our supporters and the thousands of people who worked their butts off for months and gave us millions of dollars to campaign for their values. I am resigning.”

When asked what support he needed at the party convention to stay on as leader, Mulcair said any result over 50 per cent. What leader dedicated to his party would continue to stay in the job if almost half of the convention delegates rejected his leadership?

Mulcair’s musings reveal a disturbing inability to think about what is best for the party. It’s all about him. Asked in the same interview if he had ever thought about stepping down, Mulcair replied never — “It’s not in my nature.”

In a self-serving interview with The Canadian Press, Mulcair described the moment he “decided” to stay on as leader.

“I finished that evening; Chantale (Chantale Turgeon, his deputy chief of staff) was with me, we drove back to Montreal and I said, ‘We are going to continue the fight.'” There was no hint of awareness that this might not be his decision to make, or that his feelings were secondary to what the party needed.

For almost four months Mulcair refused to accept any responsibility for one of the most catastrophic election debacles in Canadian history. It wasn’t until Feb. 10 that he sent a letter to party members saying “our campaign came up short. As leader, I take full responsibility for these shortcomings.”

But this conventional mea culpa is meaningless, because taking responsibility means recognizing that there are personal consequences, a price to pay. If I borrow my friend’s car and smash it up I “take full responsibility” by paying for it. In the NDP, no one really takes responsibility.

To its credit, this week the party released a frank report on the election that identified the campaign’s weaknesses, basically confirming what most commentators had already observed. But no one will likely be held responsible in any meaningful way.

Mulcair’s responses to the election loss suggest a sort of political post-traumatic stress disorder and an inability to grasp reality.

But the federal budget day delivered a fatal blow to the notion the party could survive with Mulcair as leader. Trudeau brought down what Armine Yalnizyan of the Canadian Centre for Policy Alternatives called “the most progressive budget in 40 years.”

Tossing out the “run from the left and govern from the right” formula the Liberals have relied on for decades, Trudeau moved the Canadian political centre a huge step to the left, leaving the NDP completely stranded. The NDP cannot craft a credible response to this budget given its platform and Mulcair’s deeply conservative politics. It can’t come back from where it is today.

The party’s recent missive to its members — “Top 10 ways Budget 2016 shortchanges Canadians” — reveals how trapped Mulcair is.

The response is cynical and misleading. “The Liberals’ budget was long on rhetoric but short on dollars when it came to keeping their promises to Canadians,” the NDP claimed.

How a leader whose platform promised a balanced budget (which was not party policy) could pen this line with a straight face is beyond me. Should the Liberals have racked up a $50-billion deficit so they could keep all their promises? The NDP — which should support virtually every Liberal expenditure — would have had zero dollars for new programs.

The party document then lists unkept (so far) Liberal promises without acknowledging the long list the new government has kept.

Pundits and NDP members alike should have been confident by now that the party would reject Mulcair and commit to returning to its social democratic roots and its traditional role as a party of big ideas.

But this is the NDP, and many commentators have noted the party hasn’t traditionally dumped its leaders for losing. The implication is that this is admirable. I am not so sure.

I remember heated arguments with an NDP friend in Saskatchewan who dismissed my involvement in “useless” social movement organizations. I suggested, only half kidding, that the NDP was not so much a political party as a cult. There was a siege mentality in the NDP rooted in feelings of ideological marginalization reinforced by a hostile media. They hated social and economic justice groups working outside the political system because they couldn’t control them. Any criticism was tantamount to heresy — and disloyalty.

In fact decades of observing the NDP from the outside has convinced me that loyalty is far and away the most important principle in the party’s culture. It is more important than political philosophy, party democracy, member engagement, and even more important than winning. In the NDP, it seems, so long as you have been a loyal member since you were 14 you will likely never be held accountable, no matter what mistakes you make.

Loyalty is an important principle in any party. And if the NDP had a leader who knew when to get off the stage, it need not be a problem for the party.

But when a leader like Mulcair is prepared to exploit it to cling to power, it is tantamount to a political suicide pact.


Trudeau’s Chance to Acknowledge the Libyan Catastrophe

The dystopian situation in Libya is so persistent that when we hear news of yet another slaughter, or the fragility of the new unity government, or ISIS taking over large swaths of the country, we just file it under “old news” and wait for the next story.

We shouldn’t. While accountability of politicians is also an old news story, this is one that’s particularly disturbing in its history and its consequences for the Libyan people, who before the 2011 “humanitarian” intervention enjoyed the highest standard of living in Africa. That UN mission toppled the regime of Muammar Gadhafi, leaving a power vacuum that was filled by many competing armed factions and two separate groupings claiming to be the legitimate government.

The Libyan story should provide foreign policy lessons for the West and for Canada, but without some kind of mea culpa and recognition of this catastrophic error, no one has to learn anything.

Which is what makes U.S. President Barack Obama’s recent admission that the Libyan intervention “didn’t work” so interesting. This was Obama’s singular intervention, even though European allies did most of the bombing. According to The Atlantic magazine, after reflecting on what went wrong in Libya, Obama told a former Senate colleague: “There is no way we should commit to governing the Middle East and north Africa. That would be a basic, fundamental mistake.” No kidding.

It seems that Obama wants to get out ahead of the legacy machine and admit this major foreign policy mistake early on. But what about Canada? Under the Harper government, Canada was one of the most eager participants in the elimination of the “madman” Muammar Gadhafi.

But the Harper government is gone, and its foreign policy has been vigorously repudiated by Prime Minister Justin Trudeau. Trudeau has tied his star to a U.S. president able to take risks as his term comes to an end, and has boldly told the world “Canada is back.” One way that he could prove that declaration would be to follow in Obama’s footsteps and acknowledge Canada’s missteps in the Libyan intervention.

All the major parties in Parliament supported the UN mission, and not a single Canadian political leader who did so has ever acknowledged that the West’s intervention was a colossal foreign policy failure. As admitted by Obama, there was no effective plan to establish an alternative government post-Gadhafi: “The degree of tribal division in Libya was greater than our analysts had expected. And our ability to have any kind of structure there that we could interact with and start training and start providing resources broke down very quickly.”

If they hope that it will go away and people will forget their complicity, what does that say about our democracy and responsible government?

The situation is actually getting worse by the week, as ISIS sweeps into areas that are completely ungoverned. According to a report by Martin Kobler, the UN special representative to Libya, the lack of political structure is risking “division and collapse” of the country. “Daesh [ISIS] takes advantage of the political and security vacuum and is expanding to the West, East and to the South. While Libya’s financial resources are dwindling, the criminal networks, including human smuggling, are booming,” he reported.

ISIS now controls some 250 kilometres of coastline around Sirte, Gadhafi’s hometown, and has established training camps, storage areas, fortification and “rudimentary institutions of governance referred to as ‘Islamic courts’ and ‘Islamic Police.'”

The horrific conditions apply not only to the people of Libya but also to its natural habitat. New Scientist magazine reported in its Feb 20-26 issue that because of the collapse of commerce, people are turning to the killing of wild animals for meat.

“On the kill list are desert gazelles, but also migrating birds. Cranes, flamingos, bustards and herons are being shot in large numbers on the coastal wetlands that are no longer guarded,” reads the report. The famous coastal juniper forests are also “under attack.” Across the border in Mali, a “rare population of desert elephants” was slaughtered using weapons from Libya.

Given the intermittent news coverage of the unfolding disaster in Libya, it simply becomes background noise. With no accountability demanded, and none likely to be offered voluntarily, our collective culpability is gradually diluted as our memories of how the thing started fade.

It started, of course, with the rationale of the lofty principles enshrined in the 2005 United Nations Responsibility to Protect (R2P) doctrine, which states that sovereignty is not a right, but rests on the responsibility of governments to protect their populations.

One of its most vocal and respected proponents at the time of the Libyan intervention was former Liberal foreign affairs minister Lloyd Axworthy. When the Libyan mission — initially a UN approved no-fly zone — spiraled into regime change and the murder of Gadhafi, Axworthy still maintained that R2P was a valuable doctrine.

Writing a year after the mission started, Axworthy said: “R2P should not be judged on the basis of the military response in Libya. Somewhere along the way, R2P has become synonymous with military intervention… The reality is that the original International Commission… made clear that the implementation of R2P is about the protection of civilians, should be considered primarily preventative and considers military action a very last resort.”

Unfortunately, Axworthy’s defence of R2P simply underlines why it is a fatally flawed principle — because it is not academics or humanitarians who decide when it should be used. It is a handy-dandy excuse for big power intervention whenever they have some geopolitical objective they can’t achieve by simply bullying smaller nations.

In fact, R2P should never have been applied to the situation in Libya at all. To be sure, there was armed conflict in Libya and a single horrific instance of Libyan troops killing some 300 protesters in Benghazi in mid-February, 2011. But soon after, the troops fled the city and it was declared free by the protesters. A month later, on March 19, the UN began its military intervention.

But none of what had happened up until UN Security Council Resolution 1973 was passed met the standard for R2P intervention. R2P is triggered by evidence of any one of four “mass atrocity” crimes: war crimes, genocide, crimes against humanity and ethnic cleansing. None of the actions of Gadhafi’s troops fit any of these categories. And when the Libyan government offered a ceasefire, NATO and Canada declared that could only happen if Gadhafi was gone — in violation of Resolution 1973.

Perhaps the failed state that resulted from R2P in Libya will have laid to rest this flawed doctrine. And while Obama did not refer to R2P specifically, his declaration that the Libyan adventure didn’t work highlights just how easily the principle can be abused. While some things might change, imperial hubris does not.














































Liberals’ shameful BDS stand gives carte blanche to Israel

Here’s a Middle East multiple choice question for you (warning: one of these will get you condemned by the government of Justin Trudeau).

Would you rather that the Palestinian people 1) once again take up armed struggle in order to end Israeli occupation of their land or 2) pursue a non-violent strategy of Boycott, Divestiture and Sanctions (BDS) until such time as Israel recognizes the rights of the Palestinian people?

Advocating a return to the use of violence against Israel may or may not get you condemned by the prime minister. But it is definitely not OK to advocate for the non-violent BDS campaign. This was made clear by the government’s support of a Conservative resolution opposing the campaign “which promotes the demonization and de-legitimization of the State of Israel,” and called upon the government “to condemn any and all attempts by Canadian organizations, groups or individuals to promote the BDS movement, both here at home and abroad.”

This is a sickening violation of Canadians’ basic rights enshrined by Justin’s father 35 years ago. As the NDP’s Thomas Mulcair (who once described himself as an “ardent supporter of Israel”) said, the resolution “makes it a thought crime to express an opinion.” The NDP and the Bloc, joined by three Liberals, voted against the resolution.

That the Liberal government is so in alignment with Israel lobby groups raises a number of questions: Just who actually makes Canadian policy towards Israel? Did Trudeau think this through at all — such as, is this in Canada’s interests? But perhaps more to the point, is it even in Israel’s interests? Does the Trudeau government have some brilliant ideas about how to get Israel to the bargaining table? Or does it believe the current situation doesn’t need resolving? It smacks of political cowardice. It’s as if Stephen Harper still rules the day on this critical foreign policy issue. Indeed the resolution reflects Harper’s declaration that criticism of Israel’s government is the “new anti-Semitism.”

We are left to wonder whether the Trudeau government can imagine any action by Israel that would cause it to “condemn” its government rather than its critics. And to wonder whether it seeks to further polarize the region or help cooler heads prevail. Giving carte blanche to the actions of Israel’s increasingly extremist government simply reinforces its determination to never negotiate and to keep pushing the envelope, whether it’s building new settlements or slaughtering civilians in Gaza.

Against that prospect, how many parliamentarians have even the slightest clue what the Palestinians are seeking through the BDS campaign? Do they know its origins?

As stated by movement leaders, Israel must:

“End its occupation and colonization of all Arab lands and dismantle the Wall; Recognize the fundamental rights of the Arab-Palestinian citizens of Israel to full equality; and Respect, protect, and promote the rights of Palestinian refugees to return to their homes and properties, as stipulated in UN resolution 194.”

This latter demand is hotly rejected by Israel even though Jews from literally anywhere in the world have, through the 1950 Law of Return (to Israel and now the occupied territories) the same right.

The BDS campaign was inspired by the successful boycott and sanctions campaign that finally brought an end to South African apartheid — a campaign, incidentally, given a major boost by none other than then prime minister Brian Mulroney. The BDS campaign was launched in 2005 by 170 Palestinian civil society groups representing virtually every sector of Palestinian society “including all political parties, unions, refugee networks, NGOs, and organizations representing Palestinians living under occupation, in Israel, and in exile.” The decision was rooted firmly in a commitment to non-violence and in international law regarding the illegal occupation of Palestinian territory.

Israel’s occupation is routinely compared to apartheid by Israelis — and not just critics of the government. Michael Ben-Yair, Israel’s attorney general from 1993 to 1996, wrote:

“We enthusiastically chose to become a colonial society, ignoring international treaties, expropriating lands, transferring settlers from Israel to the occupied territories …. We developed two judicial systems: one — progressive, liberal in Israel. The other — cruel, injurious in the occupied territories. In effect, we established an apartheid regime in the occupied territories immediately following their capture.”

Other senior Israeli political figures agreed. Shulamit Aloni, education minister under Yitzhak Rabin, and former prime minister Ehud Barak both made the comparison. Ehud Olmert, another former PM, declared: “If the day comes when the two-state solution collapses, and we face a South African-style struggle for equal voting rights…the State of Israel is finished.” With the two-state solution on life-support — and no pressure on Israel from the West to revive it — the situation so feared by Olmert is arguably already here.

In fact, the BDS campaign may be Israel’s best hope to avoid Ehud Olmert’s nightmare. Perhaps that is why Israel’s extremist Prime Minister Benjamin Netanyahu is so determined to fight BDS. In a 2014 speech to the powerful pro-Israeli U.S. lobby group American Israel Public Affairs Committee (AIPAC), he referred to the BDS campaign 18 times, calling on American Zionists to “fight back” against BDS advocates.

The BDS campaign might not worry Netanyahu so much if it weren’t for the fact that Israel now ranks near the bottom of the pile when it comes to world opinion. A BBC poll in 2013 interviewed more than 26,000 people in 25 countries and found only 21 per cent of participants had a positive view of Israel, while 52 per cent viewed the country unfavourably. Only Iran, Pakistan and North Korea fared worse. In just the last year, the percentage of Americans viewing Israel favourably dropped dramatically from 70 per cent to 59 per cent while positive attitudes towards Palestinians jumped from 17 per cent to 24 per cent.

Justin Trudeau and his government could not be more mistaken if they believe they are doing Israel a favour by supporting the repugnant Conservative thought crime resolution. Every time a Western government turns a blind eye to Israeli apartheid it reinforces that system by signalling to Netanyahu that he can do whatever he pleases.

By steadfastly denying the apartheid reality in Israel, successive Canadian governments in fact betray the long-term of interests of that country — not to mention, of course, those of millions of Palestinians.


Trade Minister Needs to Break Out of Bureaucrat’s Bubble on TPP

Are Trade Minister Chrystia Freeland’s officials misleading her about the Trans-Pacific Partnership (TPP)?

Freeland signed the agreement Thursday in New Zealand, but repeated her assurances that critics shouldn’t worry — the government hasn’t committed to ratifying it and consultations and a full debate will precede a vote in Parliament. That could be up to two years away.

Yet so far the consultation process has not penetrated the ideological bubble created by trade department officials.

Take one example. By far the biggest concern of critics (including Nobel Prize-winning economist Joseph Stiglitz) is the Investor State Dispute Settlement (ISDS) provision. This allows corporations to claim damages if they believe a government’s laws or regulations unfairly harm their interests or hurt profits.

Freeland seems to be either ill informed or misled about the provision’s impact. At a panel discussion in Vancouver last month she seemed unaware of the ISDS. Her fellow panelists, both economics professors, downplayed the threat.

For many of us who have dealt with trade bureaucrats promoting these investment protection agreements it is easy to suspect that Freeland is being deliberately misinformed by her own staff.

The Trudeau government is eager to portray itself as open to persuasion on the TPP. To bolster the position that they still might say no, the government has engaged in a flurry of consultations across the country and has made a point of inviting concerned citizens to send in questions and criticisms to Global Affairs Canada:

Sounds good. But the execution raises serious questions about how genuine the consultation will be.

First, the vast majority of consultations have been with groups supportive of these agreements: Provincial government ministers, business groups, industry reps, universities, etc. Of 74 such meetings (as of Jan. 31), there have been a handful with “students” (but not with student council representatives who have actually studied the TPP) and a couple with labour — with the Canadian Labour Congress and Unifor.

There have been no meetings with NGOs who have taken the time to examine the TPP closely, like the Council of Canadians and the Canadian Centre for Policy Alternatives, with First Nations (whose agreements with governments can be trumped by ISDS) or environmental groups.

Obviously there is still time for such engagement, but the process so far does not bode well for balanced input.

The more serious sign that trade officials are busy manipulating their minister is revealed in the answers the government provides to Canadians who take it up on the offer to engage. When they write to the government asking about investment protection and the ISDS in the TPP, here’s the response they get: “With respect to Investor-State Dispute Settlement (ISDS), the TPP will not impair the ability of Canada or its partners to regulate and legislate in areas such as the environment, culture, safety, health and conservation. Our experience under the NAFTA demonstrates that neither our investment protection rules nor the ISDS mechanism constrain any level of government from regulating in the public interest.”

This is so demonstrably false as to shock even the most jaded cynic. Does Freeland know what is being said in her name? Since the North American Free Trade Agreement came into effect on Jan. 1, 1994, Canada has been the target of 35 investor-state claims under the agreement. Nearly two-thirds involved challenges to environmental protection or resource management laws or regulations. Canada has already paid out more than $170 million in damages in six cases (lost or settled) and abandoned most of the “offending” legislation and regulations. We face additional corporate claims totalling more than $6 billion in potential penalties for NAFTA “violations” such as the Quebec government’s decision to ban fracking under the St. Lawrence River.

This does not take into account the legislation and regulations (federal and provincial) that have never made it out of their cribs, killed by the chill of knowing they wouldn’t pass ISDS muster. A recent UN report quoted a former Canadian official as saying: “I’ve seen the letters from the New York and D.C. law firms coming up to the Canadian government on virtually every new environmental regulation… Virtually all of the new initiatives were targeted and most of them never saw the light of day.”

In one of the most egregious cases decided under NAFTA, Bilcon of Delaware, a tribunal effectively overruled federal and provincial governments’ environmental concerns last year and allowed a quarry to go ahead in Nova Scotia. University of Ottawa law professor Donald McRae, one of the tribunal members, wrote a detailed dissenting opinion warning of the negative impact of the decision.

“Once again, a chill will be imposed on environmental review panels which will be concerned not to give too much weight to socio-economic considerations or other considerations of the human environment in case the result is a claim for damages under NAFTA Chapter 11,” McRae wrote. “In this respect, the decision of the majority will be seen as a remarkable step backwards in environmental protection.”

Even one of NAFTA’s strongest supporters, Toronto trade lawyer Larry Herman, expressed concern that the dispute tribunals were unilaterally expanding their mandate to circumvent domestic courts. The decision, Herman observed, “will feed ammunition to those who oppose international arbitration as a form of dispute settlement.”

Just as these unaccountable panels are expanding their powers to interfere in the democratic legislative process, Canada is about to extend these arbitrary powers to corporations in nine more countries in the TPP.

Yet so far the “ammunition” provided by this evidence has run smack up against the Kevlar vests in the Global Affairs bureaucracy. The department’s name has changed under the Trudeau government, but its approach is powerfully reminiscent of the bad old days of the Department of Foreign Affairs and International Development, when a priesthood of trade bureaucrats protected the Holy Grail of “free trade” against all detractors. So deeply did they believe in their mission that factual analyses of agreements like NAFTA and the Multilateral Agreement on Investment (MAI) were not even acknowledged, let alone heeded.

Noel Schacter, chief trade policy negotiator for the B.C. NDP government in the late 1990s, recalls dealing with federal officials.

“Federal government trade negotiators sold free trade by overstating the upsides and underestimating the downsides,” he says. ¨This was especially true of investor-state provisions, which had the potential to be lethally damaging to critical social policy areas such as medicare or the environment. These public servants appeared to have little knowledge of these social policy areas and little concern. During my tenure I never saw any independent analysis that demonstrated why provisions in trade treaties were necessary or how the broader public good would be served. It often felt like being in a temple of true believers and those of us who questioned the doctrine were heretics.”

Is there any way to counter the pernicious influence of these free-trade zealots? The most powerful antidote would be independent analyses of the controversial areas of the TPP — in other words, genuine consultation. The only time this has been done was under the NDP government of Glen Clark, which provided funding for many social sectors — such as First Nations, women, unions, and environmentalists — to hire experts and study the impact of the Multilateral Agreement on Investment on their constituencies. The resulting studies led the B.C. government to oppose the MAI (which eventually failed to win needed international support).

If Prime Minister Justin Trudeau and Freeland are truly committed to broad consultation beyond the business community, they should follow the same model.

The Canadian Environmental Assessment Agency already does something similar. Its Participant Funding Program “supports individuals, non-profit organizations and Aboriginal groups interested in participating in federal environmental assessments.” It would be a tragic irony if this consultation program led to new environmental legislation — which then triggered a multi-billion-dollar claim by a foreign corporation under the TPP.


On TPP, Trudeau Must Think Like a Keynesian

Place your bets. Will Justin Trudeau and his economic advisors choose a neo-Keynesian approach to the growing economic disaster facing the country or will it stick to the neo-liberal ideology that has been the stock response of Liberal and Conservative governments for the past 30 years?

Trudeau’s planned deficits (though very modest ones) for three or four years suggests the possibility of a return to government intervention in the economy. But his infrastructure program is not really incompatible with neo-liberalism: even the most devout free-marketeer will agree, under pressure, that we actually need roads and bridges and sewer and water lines.

The real test of where the Liberals are going to take the economy is tied up in the government’s pending decision on the Trans Pacific Partnership — the TPP. The fact that the Liberals have not yet committed to the TPP (Trade Minister Chrystia Freeland said recently “We’re very much not there yet.” — a significant retreat from her initial statements) suggests there is a real debate going on in the PMO about signing another investment protection agreement.

There is now a large body of research and commentary exposing just how detrimental the TPP is to Canada’s economy and democracy. But there has been little in the commentary that looks at the actual record of these deals — specifically the first ones signed; NAFTA and its predecessor the Canada-U.S. Free Trade Agreement. A trip down memory lane will be helpful in understanding where the TPP (and its EU counterpart, CETA) will take us.

Cost of doing business?

We pay a high price for these treaties in terms of lost sovereignty — but what is the pay-off? Do these agreements actually increase trade and foreign direct investment (FDI) — their stated purpose? Studies looking at the FTA and NAFTA after 10 years revealed that such agreements have little positive impact. While Canada-U.S. trade (imports and exports) did increase dramatically in the 1990s, a study by Industry Canada concluded, “the impact of (free trade) after controlling for other variables on Canadian exports to the U.S. was modest, (just) nine per cent… the strong U.S. economic expansion and the real exchange rate were mainly responsible for the large expansion of Canadian exports to the U.S. in the 1990s.”

As for foreign direct investment (FDI) positive numbers presented by “free trade” supporters are also extremely misleading. While most people assume that foreign investment means new production and jobs, in Canada it doesn’t. In 1998, the Investment Review Division of Industry Canada prepared a report that looked at FDI in Canada. In 1997, it reached $21.2 billion — the second-highest total on record. However, according to the study, fully 97.5 per cent of that total was devoted to acquisitions of Canadian companies. And 1997 was not an aberration. On average, between June 1985 and June 1997, 93.4 per cent of FDI went to acquisitions. In 2001 the figure was 96.5 per cent.

Our race to the bottom with these deals reveals that things just keep getting worse. NAFTA resulted in a loss of over 275,000 of the best jobs in the country. By focusing exclusively on exports and abandoning any policy initiative aimed at strategic industrial development, Canada’s economy has been going backwards in terms of value-added industries. According to the Post’s John Ivison “the oil and gas sector’s share of total exports has increased to 23 per cent in 2014 from six per cent a decade earlier, just as a manufacturing industry like the automotive sector has slipped to 14 per cent from 22 per cent.” The trade deficit for 2015 was dismal. From October 2014 to October 2015 it reached $17.4 billion — the worst one-year total on record.

Investment protection agreements are not primarily about trade — they provide “investors” (that is, transnational corporations) with extraordinary rights that trump the sovereignty of those countries that sign them. But it only works at all if you have a capitalist class that actually takes advantage of these rights — by taking risks, investing in innovation and engaging in aggressive overseas marketing — such as in the five Asian countries who are partners in the TPP. Otherwise we simply agree to become a punching bag for transnational corporations doing business here in Canada.

But there is a huge risk in signing these deals because they require a leap of faith in Canadian corporations actually shifting their focus away from the U.S. as a market for exports. If past behaviour is any guide, they won’t.

NAFTA was supposed to challenge large Canadian corporations to compete with the U.S. on productivity. It never happened. Two studies on competitiveness (1991 and 2001) by Harvard Business School’s Michael E. Porter concluded that “The U.S. is just much more entrepreneurial . . . Research uncovered key weaknesses in the sophistication of (Canadian) company operations and strategy.” Some Canadian firms did compete internationally but did so on the cheap. Post-NAFTA they relied more for their profits on “natural resource advantages or lower labour costs than other G7 competitors instead of sophisticated products and processes.”

Little if anything has changed. Indeed, with the Canadian dollar at seventy cents and falling, Canadian companies are even less likely to take advantage of the TPP to invest in and export to the Asia Pacific countries. The one thing that will change if we sign the TPP is that corporations based in nine additional countries will be able to invest in Canada with new and powerful rights — including the right to sue the Canadian government for any measure that affects their future profits.

Keynes vs. Friedman

Perhaps Mr. Trudeau believes he can have it both ways: tinker a bit with some neo-Keynesian policies of intervention but stay in the big boys club and avoid Bay Street condemnation by signing the TPP. Unfortunately it simply doesn’t work that way. An examination of what happened to Ontario’s effort in strategic public investment demonstrates in spades just how incompatible the two approaches are.

Ontario’s Green Energy Act promoted domestic solar and wind generation. However, in November 2012, the “buy local” aspects of the program were ruled in violation of WTO rules. In May, 2013 Canada lost its appeal. Ontario immediately announced that the made-in-Ontario content requirements for wind and solar projects would be scrapped. The program was effectively dead. And every time Canada signs another “trade” deal the noose tightens around any government-sponsored effort to transition to a clean-energy economy.

Even if these agreements actually enhanced trade, international trade will almost certainly remain in the doldrums for the foreseeable future. This is the case not just because of the slowdown in growth in China but because most developed countries are struggling and following neo-liberal policies of austerity and suppression of wages — the same deadly combo Canada has experienced. It all adds up to chronic low demand and diminished world trade.

One can only hope that Trudeau and his advisors will conclude that when approaching economic growth they should focus on the things they can change and avoid those they can’t. Between 75 and 80 per cent of our economy is domestic: good and services produced and consumed here. If the government actually wants to grow the Canadian economy it has to find a way out of its trade straight jacket and stimulate the domestic economy. The country that rejects the ideological extremism of neo-liberalism first will have a huge advantage over the next 10 years.

But to do so requires an actual rejection of some key neo-liberal policies — including, of course, rejection of any more investment protection agreements. Additionally, as I argued in a recent column, a return to fair and robust taxation sufficient to bring the government share of the economy back to 1980 levels — levels necessary to permanently stimulate the domestic economy.

If the NDP is looking for ways to prosecute a new adversary the economy is it — it will dominate the political landscape for the rest of the Liberal mandate. There are compelling arguments: An industrial strategy focused on accomplishing the climate change promises of the Paris summit, a return to strings-attached federal transfers to prod the provinces to reduce tuition fees and increase social assistance levels (or even a guaranteed annual income), imposing a living-wage standard on all federally-funded projects, pressing Trudeau on his promises on CPP and EI and ending oil subsidies, eliminating the tax breaks on capital gains and dividends, adding a couple of tax brackets on wealthy Canadians, and perhaps a tax on idle corporate capital (half of one per cent would bring in over $3 billion).

Pierre Trudeau’s first government faced an NDP caucus and leader that pressed him from the left on numerous fronts. Is it too much to hope that history might repeat itself?