The Victoria Advocate -
http://TheVictoriaAdvocate.com
Canadians want U.S. to pay for beef ban
ALWYN SCOTT
The Seattle Times
Sunday, February 27th, 2005
SEATTLE - Call it the stampede from up north.
Under an obscure provision of the North American Free Trade Agreement, Canadian cattlemen are asking the U.S. government to pay hundreds of millions of dollars to cover losses they incurred when the border was closed to Canadian beef after mad-cow disease turned up in Alberta.
With the ban set to be lifted early next month, the case spotlights NAFTA's little-known Chapter 11, which allows companies to claim damages from governments if their laws or actions damage trading partners.
About 500 cattlemen, mostly from the province of Alberta, have filed 121 claims under Nafta seeking at least $325 million in compensation from U.S. taxpayers for the May 2003 decision to halt imports of Canadian beef and cattle, their lawyer said.
NAFTA critics say the mad-cow case shows how the rules increasingly are being used to let foreign companies override national or state laws. Big awards, they say, could frighten lawmakers into watering down or avoiding safeguards. In one case in Mississippi, a NAFTA panel used the rules to overturn a jury verdict.
"Foreign investors are empowered under Chapter 11 to sue us for cash compensation over laws that affect their profits, when in fact our own corporations wouldn't have that right," said Rep. Maralyn Chase, D-Washington. "That bothers me a lot - especially if we pass laws protecting health or the environment."
While noting that trade agreements are essential to opening export markets for U.S. products, Chase said she's concerned about Chapter 11 provisions in other trade deals, including the Central America Free Trade Agreement, which awaits congressional ratification. A group of ambassadors will visit Seattle tomorrow to promote CAFTA.
So far, business interests have won $35 million from Canada and Mexico in five of 11 cases concluded since NAFTA, a trade agreement among the United States, Canada and Mexico, went into effect in 1994.
An additional 31 cases are pending, seeking $28 billion in claims, according to a tally by Public Citizen's Global Trade Watch, a Washington, D.C.-based policy group founded by Ralph Nader, which released a study on Chapter 11 Tuesday in Olympia.
Some of these cases, including one $10 billion claim, have not moved beyond the initial filing stage.
The United States has won all three cases against it that have concluded so far.
The U.S. closed its border to Canadian beef and cattle after a case of bovine spongiform encephalopathy was diagnosed in Alberta in May 2003. Since then, three more infected cattle have been found, including a case in Mabton, Yakima County, that was traced to Canada.
Last month, the Department of Agriculture said it would allow Canada to export beef and cattle less than 30 months old to the United States starting March 7.
While opening the border to Canadian beef would limit future claims, it would do nothing to diminish the losses cattlemen say they've suffered so far.
"The damages we're seeking are for what the border closing has already done to us," said Todd Weiler, an attorney representing the cattlemen.
Weiler said he expects to formally initiate arbitration next month, which starts the process of setting up a three-member panel of trade lawyers to hear and decide the case.
The damages specified in the cattlemen's filings are minimums that the panel could increase, he said. "It could be much more."
NAFTA's Chapter 11 is intended to protect companies from having factories or land seized by foreign governments, or from laws that unfairly favor a nation's own businesses.
The cattlemen's claims are based on a clause that says companies from other NAFTA countries are entitled to the most favorable treatment that U.S. companies would receive in similar circumstances. The provision is designed to prevent countries from arbitrarily tossing impediments in front of foreign competitors, and to encourage businesses to invest and compete across borders.
The Canadian cattlemen say they invested in feedlots, cattle, feed and equipment to supply the U.S. market. The flow of cattle and processed beef across the border has been common for so many years, they contend, that the U.S. and Canada constitute one, integrated market.
For such an integrated market, closing the border had no meaningful public-health effect, the Canadians claim. To really protect U.S. citizens and render the border closing meaningful, the U.S. should have killed all of the Canadian cattle already in the United States, Weiler contends. However, that would have hurt U.S. ranchers and feedlot operators who owned those cattle.
Instead, the border closure boosted the price of U.S. cattle, while creating a glut of cattle in Canada that pushed down prices there. The move was based on "protectionist politics rather than science," Weiler said.
"The rules give corporations a platform to argue that any government measure that negatively impacts their profitability is a violation of NAFTA," said Mary Bottari, co-author of Public Citizen's Chapter 11 study.
"The U.S. government should be able to open and close borders because of health concerns without this expensive litigation. Even if the U.S. wins, the case will cost millions of dollars to defend."
:help:
:cboy:
