Chapter IV - The Relationship between the Staples State and International Trade As Pertains to the Canadian Fisheries Industry - Gunhild Hoogensen
Five hundred years ago, the explorer John Cabot returned from the waters around what is now Newfoundland and reported that codfish ran so thick you could catch them by hanging wicker baskets over a ship’s side. Cabot had discovered a resource that would change England forever, the basis of a maritime trade that would give that tiny island kingdom the wealth, skills and shipbuilding capacity which would transform it into a global empire. He had discovered the most fantastic fishing grounds the world had ever seen, waters so teeming with life that a vast swath of the new world was colonized just to harvest its seemingly limitless bounty.30
The fishing industry is one of the oldest in Canada, initiating trade with primarily Britain when Europeans first came to Canadian shores. The fisheries have played an important role in the development of Canada’s economy being one of the first bulk staples products exported from Canadian shores. The Canadian fisheries have been an increasing concern, if not for the contribution they now make to the Canadian economy (which is small), but for the environmental and conservation costs that have been paid within the fisheries industry and communities. Many fish stocks, not only cod, are at historically low levels. How to reverse these trends, not only in Canada but worldwide, and how to manage a sustainable fisheries is an increasing concern and priority in international fora, as evidenced by the attention garnered at the March 2002 UNEP Workshop on the Impacts of Trade-Related Policies on Fisheries and Measures Required for their Sustainable Management, the November 2001 WTO Ministerial Conference held in Doha, the OECD Review of Fisheries published every two years, as well as the continuing efforts of the Food and Agriculture Organization of the United Nations (FAO) to bring fisheries issues to light. These various fora provide analyses that establish and illustrate the critical link between economic, environmental, cultural, political and social values and variables in the fisheries context. In Chapter Two it was noted that all the natural resource sectors are subject to various notable influences, including trade liberalization, globalization and transnational organizations (Wellstead). It is the relationship between these influences, particularly trade liberalization, on the fisheries that will be the focus of this chapter, including in what way these relationships are relevant to our understanding of the development of staples theory and staples/post-staples economies.
Institutions such as the World Trade Organization (WTO), as “the only global organization dealing with the rules of trade between nations,”31 hope to work in tandem with other NGOs and IGOs in the interest of securing sustainable and economically successful fisheries. The ways in which these influences impact fisheries is dependent upon the nature of the governmental structures and regimes that govern the fisheries within each state, and how the fisheries relate to these various institutions, as well as how natural resource sectors and governments relate to external institutions (such as trade liberalization institutions like the World Trade Organization). These relationships change over time, and are particularly relevant when examining the emergence of new economic sectors amongst the traditional sectors, or rather the shifts between traditional staples economies to new post-staples economies.
A staple is essentially a primary sector “building block” in natural resource based economies. It is a raw or unfinished commodity such as timber or fish which is sold on the market with little to no processing (Hessing and Howlett, 1997). Staples economy theory, developed by Harold A. Innis, is a theory based on the unique Canadian experience as a new settler society with a vast resource base. The theory argues that the development of Canada’s economy is strongly linked to its natural resources, driven by global demand for these resources, or rather, subject to the external pressures of global demand (ibid; Laxer, 1985). The pressures of external demand creates a centre-periphery relationship, whereby the external forces represent the metropole or centre which determines the development of the periphery, in this case Canada’s, economy. There are some who have a problem with this analysis, as it creates a “Canada-as-victim” dynamic (Laxer, 1985). Staples theory takes Canada “off the hook”, so to speak, regarding its own responsibility for its economic development: “(When staples theory is) applied to Canada, underdevelopment was due not to entrepreneurial weakness, cultural deficiencies, or lack of aggregate demand, but to the combination of control of internal surplus by a national bourgeoisie unconcerned with national industrial development, and the market demands and constraints imposed by Britain and, subsequently, the United States” (Marchak, 1985: 676). The development of the Canadian economy, argues Gordon Laxer, cannot be solely attributed to policy emanating from metropolitan countries, echoing the view of Mel Watkins when he stated “Staple economies are often believed to be more at the mercy of destiny than they actually are” (Watkins, 1967: 63 in Laxer, 1985). That Canada has been heavily reliant upon its natural resources is not matter of dispute, but who has controlled the development of this resource-based economy is the centre of this debate. Has Canadian internal policy been responsible for the creation of this staples state, or has it been the power of external forces, or metropolitan countries such as Britain and the United States? The dynamics between internal and external forces on the Canadian economy is particularly relevant when looking at international trade. Here, the relationships between Canadian and “metropolitan” policy come to the fore as international trade agreements represent the negotiated settlements between states regarding what they will trade and under what conditions. International trade agreements have also evolved over time, having relevance to Canada’s early as well as later economic development. How does this all figure then when examining Canada from a staples/post-staples perspective?
Canada is arguably moving from a staples to post-staples economy, at least insofar as a number of the dominant provinces such as Quebec and Ontario have left natural resources behind as fundamental features of their economic development (see table 2 in Chapter One). Even provinces such as British Columbia that have been traditionally labelled as staples economies are demonstrating a clear complexity within their economies whereby manufacturing, particularly in electronics and communication, now by far outstrips growth in the natural resource sectors (Hutton, 1994). However, the fisheries remain, in large part, a feature of Canada’s traditional, staples basis.
The purpose of this chapter is to discuss where, particularly, the Canadian fisheries stand in relation to the changing Canadian economy from a staples to a post-staples economy, and how this relationship in turn is affected by external factors such as international trade regimes and agreements.
This chapter highlights the developments in the Canadian fisheries, examining some of the problems experienced by the Canadian fishing industry, and in what ways, if any, the Canadian fishing industry has been impacted by trade liberalization and trade agreements such as the NAFTA and the WTO. This, in turn, can contribute to the internal versus external forces debate concerning some of the assumptions of staples theory, at least with regard to whether or not Canada has been made of victim of its colonial policy history, or has itself been responsible, through internal policy, for the developments of its staple economy, in particular the fisheries.
Trade policy, Staples, and the fisheries
Trade can be understood in its most simple form as "the peaceful and systematic exchange of goods"32 or can become increasingly complex such as "as an activity carried on by a class of traders for financial gain."33 Either way it speaks to a process of exchange. Such exchange can take place in many forms and under many different types of conditions, some restricted and some unrestricted. Trade liberalization entails the processes of specialization and comparative advantage (efficient utilization of resources) and the reduction of tariffs and non-tariff barriers to trade, expanding consumption while increasing wealth for all trading partners.34 The primary international vehicle for trade liberalization has been the General Agreement on Tariffs and Trade (GATT) and thereafter the World Trade Organization (WTO). For export driven markets, in this case the fisheries, such agreements would theoretically have significant impact, especially as they are thought to benefit large exporters as their products are cheaper in a tariff-free market.35 As tariffs have been reduced, non-tariff barriers have become a central focus, such as national standards or government procurements which favour domestic over foreign operations.36
The fisheries have experienced a myriad of trade relationships, including the truck and barter system (the exchange of commodities) or in forms of exchange through money or credit.37 The truck system for a long time benefited the merchants who bought the fish from the fishers, in that no money exchanged hands. The fishers exchanged fish for foodstuffs and supplies from the merchant, but the merchant controlled the prices for both, ensuring that the fishers were constantly in their debt.38 Great Britain actively pursued a free trade agenda in the later 1800s, and this agenda was imposed upon its colonies. This, in conjunction with the fact that this policy toward the colonies forced the likes of Canada to pursue broader trade possibilities (such as the US), set Canada’s course toward a predominantly, if not controversial and rocky, free trade direction, beginning with reciprocity.
The notion of reciprocity played a central role in the development of trade in Canada, and was intricately linked to the fisheries. Debates as to whether or not Canada should enter a reciprocity treaty with the United States centred around, in part, the interests of the fisheries as New Brunswick was advocating reciprocity, while Nova Scotia wished to pursue alternatives to reciprocity which would enhance its fish monopoly.39 Reciprocity entailed a reduction of tariffs between the cooperating nations, and although considered a measure of free trade between the contracting parties (a first step towards free trade for Canada and the US), it did not mean free trade in and of itself since it raised differential duties against outside trading partners.40 Although the system of trade was still mercantilist, Canada was now broadening its trade parameters and reaching out to new markets. The reciprocity treaty with the United States in 1854, and the subsequent negotiations to resume reciprocity after the treaty was abrogated in 1865-66, demonstrates the desire on the part of both parties to secure or maintain tariff preferences between the two countries.41 Although not consistent with a unilateral free trade approach, reciprocity featured aspects of a liberal free trade regime which, it was hoped, would manifest itself into a broader free trade agreement in the future. 42 In the meantime, however, it was the fisheries that ensured that a reciprocity agreement would be signed – the threat of eliminating American fishing rights and privileges in Canadian waters was decisive in instituting a long term relationship between the two neighbouring countries in relation to their successful and unsuccessful pursuits for freer trade.
The period between 1866 and 1935 was a very low period in the Canada-US trade relationship with little to no agreements on exports, and where Canada’s National Policy was the focus (designed to settle the prairies, connect the country by railroad, and protect nascent Canadian industry), however, a number of fishing industries were the exception.43 Canada’s National Policy was to increase foreign (particularly the US) capital in the creation of ‘branch plants’, forcing even greater reliance on staple resources for export earnings.44 The fisheries were engaged in the Fordist program, and "as in other industries, capital began to displace labour in importance and large-scale to succeed individual production."45 The Fordist model demanded a stabilized supply, and therefore encouraged a constant and continuous flow of fish to market, which demanded greater and greater technological reliance, particularly upon trawlers.46 By 1911 Canada negotiated another free trade agreement with the US, although the negotiating Canadian government lost the 1911 election as a result. Regardless, exports to the US continued to rise.47 Since 1935 Canada has pursued a tariff reduction direction, either multilaterally or bilaterally with the US.48 This is not to suggest, however, that the Canadian, Maritime, and Newfoundland governments were constant advocates of free trade, or that they never met the idea with resistance. However it can be said that these same governments often felt the pressure of engaging in such treaties and agreements to secure trade for the fisheries.
An example of such resistance and its ultimate failure can be found in the attempted creation of a cooperative program through the Newfoundland Associated Fish Exports Limited (NAFEL), developed in 1947 to complement the work of the Newfoundland Fisheries board. NAFEL reflected an attempt to control the export of salt fish through a monopoly or marketing cooperative. The initiative failed in the 1950s, not long after its creation, in large part due to lack of “support in the political establishment.”49 The branch plant form of industrial organization, linking Canada to larger, foreign-owned companies (predominantly in the USA), took hold in Newfoundland, and in the Canadian fisheries industry overall.50 The Canadian government encouraged Fordist development through private enterprise, focused on the expanding frozen (as opposed to salted) fish market, and did not recognize a conflict with stabilizing supply, requiring extensive and continuous fishing with trawler technology, which could match and increase current catches with less that 10% of the fisherman population, as “there was room for expansion in the fisheries, as the potential of groundfish stocks was not fully utilized, and, in any case, Canadian fisherman took less than 7 percent of total codfish catches off the eastern shores.”51 As well, the industrialization program employed by the Canadian government called for “a longer fishing season and more fishing effort.”52
Canada increased its intervention into natural resources, but the bulk of the control, for the longest time, over the fisheries remained in the hands of the merchants, focused on trade instead of production, with fishers beholden to them through the truck or credit system.53 The merchants, in particular in Newfoundland, were largely committed to the business confines of liberal thinking: “But to join in any large-scale cooperative effort is precisely what the merchants of St John’s have always failed to do. They have insisted on conducting their business on a basis of pure individualism without regard to the interests of the country and without regard to the successes achieved by their foreign competitors.54 Canada and the United States, Canada’s largest trading partner, have to date engaged in 7 fisheries agreements:
Agreement between the UK and the USA respecting the North Atlantic Fisheries (Signed July 20, 1912, In Force Nov. 15, 1912). CUS 456.
Convention for the extension of Port Privileges to Halibut Fishing Vessels on the Pacific Coasts of the USA and Canada (Signed March 24, 1950, In Force July 13, 1950). CTS 1950/5.
Convention on Great Lakes Fisheries (Signed Sept. 10, 1954, In Force Oct. 11, 1955). CTS 1955/19.
Amended May 19, 1967. CTS 1967/10.
Convention for Preservation of the Halibut Fishery of the Northern Pacific Ocean and Bering Sea (Signed March 2, 1953, In Force Oct. 28, 1953). CTS 1953/14.
Amended March 29, 1979 and October 15, 1980. CTS 1979/27 and 1980/44
Treaty on Pacific Coast Albacore Tuna Vessels and Port Privileges (Signed May 26, 1981, In Force July 29, 1981). CTS 1981/19.
Pacific Salmon Treaty (Signed Jan. 28, 1985, Amended by Exchange of Notes May 5 and June 12, 1986, and In Force March 27, 1987). CTS 1985/7.
Amended by Exchange of Notes Oct. 18, 1989. CTS 1989/41.
Exchange of Notes constituting an Agreement amending Annexes I and IV of the Treaty concerning the Pacific Salmon, signed in Ottawa on January 28, 1985, as amended (with annexes). (Signed and In Force February 3, 1995). CTS 1995/39.
Agreement on the Establishment of a Mediation Procedure regarding the Pacific Salmon Treaty. (Signed and In Force September 11, 1995). CTS 1995/13.
Agreement on Fisheries Enforcement (Signed Sept. 26, 1990, In Force Dec. 16, 1991). CTS 1991/36.55
A liberal trading regime dominated the fisheries, driven by supply and demand.
In general it can be said that the Canadian fishing industry was subject to market forces, without much in the way of government protection or substantial policy outside of trade agreements, to the greater extent of its history until new ‘buffering’ strategies were employed in the interest of conserving fish resources through fisheries management strategies, which became increasingly relevant, although recognized far too late where the cod fishery was concerned, as the fight against over-fishing had begun.
The supply-demand relationship has had particular significance with regard to the phenomenon of the over exploitation of the fisheries, or overfishing. The U.S. National Research Council defines overfishing as: “fishing at an intensity great enough to reduce fish populations below the size at which they would provide the maximum long term sustainable yield or great enough to prevent their returning to that size.”56 Demand continues to exceed supply, and thus the incentive to extract as much resource as possible, or to overfish, does not cease. Over exploitation is further exacerbated by over capacity, or rather too many fishing boats for too few fish. This in turn is often exacerbated by subsidization of the fisheries industry, a feature of developed country fishing practices, which leads to over investment in the industry snowballing into over capacity and over fishing.57 Subsidies, meaning the internal, national policies of fishing nations, have become a significant part of international fisheries discussions, as they are blamed in large part for the problems of overfishing and depleting stocks.
What constitutes a subsidy in the fishing industry? And to what extent does Canada participate in subsidy-delivery, and how does it affect fisheries management, fishery communities, and trade? These questions are relevant when attempting to determine the significance of Canada’s internal role in the manipulation and exploitation of part of its staples economy, the fisheries. Subsidies provide a good example of what has happened “on the inside”, either in response to or in conjunction with, the forces for export and international trade.
William Schrank examines the impact of subsidies in a fisheries context, providing a good starting point from which to evaluate the role of the subsidy with regard to trade, sustainable development, economic security, and ultimately a healthy oceans environment. Understanding subsidies “as occurring ‘when the government through its actions enables producers of goods and services to avoid full payment for the factors of production and/or to behave differently in the marketplace than they would otherwise,” illuminates two key features – financial support emanating from government sources which increases profit potential in the marketplace, and the concurrent avoidance of the ‘real’ costs of that marketplace. The ways in which such government support can be understood as subsidies nonetheless varies according to whether they include only government payments made directly to individuals or companies, or whether they include government payment for general infrastructure which is not, in its entirety, covered by the designated tax base.58 As Schrank states, subsidies are not necessarily evil in their own right, as many exist with the purpose of promoting “the pre-eminent social goal of improving human safety.”59 However, it is just as possible that some subsidies no longer promote this goal, or even detract from it, especially with regard to the fishing industry whereby subsidization during undercapacity may have served a greater social purpose, but now contributes to overcapacity, contributing to the destruction of the fish stocks and therefore reducing social, economic, and ecological security.
However, Schrank also identifies those programs that promote environmental, ecosystem, and particularly fish stock sustainability as subsidies as well.60 Government programs which largely work toward a better managed fishery, downsizing fleets and fishing capacity, regulating TAC, by-catch, and minimum size of fish at harvest, ‘subsidize’ the industry in a negative (reduced potential profit) as opposed to positive (increased potential profit) manner. Although Schrank, in general, broadly identifies any government action or even inaction to constitute a subsidy as long as it has an impact on the potential profit of industry, his article does raise an important point (whether intended or not) that there is very little government can do without having some sort of impact on industry and on the market.
Perhaps one of the most controversial moves by the Canadian government was the implementation of the Unemployment Insurance program in the fishing industry, allowing fishers to collect stamps toward UI benefit entitlement. This program had the effect of reducing the fishing season as fishers stopped as soon as they had enough stamps, extended the salted fish production (as this work was counted towards the accumulation of stamps), (section missing here but I can add it when I get to my earlier draft of this paper).
Accordingly, current proposals and actions that attempt to promote fish stock recovery and prevent further ecosystem damage, both of which are critical to a sustainable fishery, do have an impact on the market, potential profit, and possibly the subsidy debate. In this respect it could be argued that subsidies are one of the primary methods by which the Canadian government has become involved in the fisheries (it is one of the few staples which has largely remained under federal jurisdiction), both with regard to subsidizing fishers themselves, as well as to implementing conservation policies. The dominance of liberalization however is still apparent however, whereby new fish stocks replace the old giving the impression of a financially healthy, if not physically sustainable, fisheries industry. An example of this can be obtained from the reports issued by the Organization for Economic Cooperation and Development (OECD). In the 2001 report, for example, Canada’s fisheries appear financially in good stead due to a focus on crustaceans. The 2001 OECD Review acknowledged the low volume of landings in the Canadian fishing industry in relation to historical levels, but increased crustacean landings and an improvement in aquaculture secured Canada a record overall volume in 1999 of 1.1 million tonnes, or CAD 1.9 billion in value.61 It praised the Canadian government efforts to increase conservation through bilateral and multilateral fishing agreements such as the Pacific Salmon Treaty and the International Plan of Action (IPOA) adopted by the FAO, but Canada nonetheless appears to be invigorating these efforts from a deficit position. Historically low levels of Canada’s significant fish stocks such as cod and salmon make the conservational efforts appear too little too late, as the industry shifts its reliance onto currently thriving stocks such as crustaceans.
Although Canada has managed to sustain, and even increase, its overall fish/seafood volumes (exports in 1998 were at their highest value thus far), this has been entirely dependent upon new sources of product, rather than from the traditional stocks that previously defined the Canadian fisheries market. Cod stocks continue to be dangerously low, with Pacific salmon stocks, Coho in particular, following close on the heels of the cod if not surpassing it with regard to high risk of extinction.62 Overcapacity in the processing sector has equally placed undue pressure on the fish stocks, with the result that the government of Canada is presently pursuing initiatives to re-orient the focus of the processing sector, including value-added secondary processing, aquaculture, and ‘rationalization’ of the industry.63 However, pressure to export fish products continues to mount, as Canada is the number one supplier of seafood to the US market: "the United States is the second largest importer of fish products in the world, after Japan," 64 and the European Union opened its tariff rate quotas on cooked and peeled shrimp from Canada, allowing greater export potential. Dire though the Canadian fishing industry is, it remains the largest foreign supplier of seafood to the US, accounting for 67% of total Canadian fish exports. It additionally supplies over 100 countries around the world. What Canada imports, largely from the US, is turned around into value-added product and re-exported primarily to the US market.65 Supply and demand, liberal trade objectives, appear to prevail over internal protections of either fishers or fish (subsidies), although mismanagement by the Canadian government of the fisheries cannot be discounted.
Trade agreements, and in some general respects the NAFTA, apply to the fisheries primarily with regard to the maintenance of international fisheries laws such as the 200 mile Extended Economic Zone, and in later agreements, conservation efforts. Their impacts, both in earlier agreements as well as more recent, have had a significant effect on the development of the fisheries industry. These agreements attempt to balance the needs of trade and economic security with the needs of conservation and environmental security. The NAFTA and WTO (and their predecessors the CUSFTA and GATT) have had decision-making impacts on the directions both fisheries have taken. The NAFTA, a trade agreement established between Canada, the United States and Mexico, was implemented in 1994, integrating and expanding the 1989 CUSFTA (Canada-United States Free Trade Agreement) with a new agreement with Mexico. The NAFTA affirmed the rights and obligations all parties held to the General Agreement on Tarrifs and Trade (GATT) by 1994, but stated that any inconsistency between other agreements and the NAFTA would defer to the NAFTA unless otherwise specified in the NAFTA.66 One year later the Uruguay Round resulted in the creation of the World Trade Organization (1995), which has since had a role, in conjunction with the NAFTA, on Canadian international trade. By 1996 Canada’s economy had experienced extensive liberalization through both the NAFTA and WTO, thereby increasing even further Canada’s export reliance on its primary trading partner, the United States.67 By 1998, the United States had 83% of Canada’s merchandise exports, including primary products.68 Primary products, in addition, still accounted for almost one third of Canada’s merchandise exports, illustrating yet again its heavy dependency upon natural resources.69 Due primarily to the NAFTA, Canada’s tariffs have all but been eliminated between it and the US. However, Canada has continued to impose high tariffs towards other countries, particularly those in the developing world which would be considered to have a ‘comparative advantage’ over Canada, especially in the area of food products.70
Due to this very close relationship with the United States, fostered by CUSFTA and NAFTA, some tension is developing with regard to Canada’s additional commitments to the WTO, as noted by WTO Director-General Mike Moore in his address in Buenos Aires in November 2000. With 90% of its trade taking place within the NAFTA, Canada’s commitments are not global but regional. As such Canada’s trade actions are motivated by like actions in the United States which overwhelmingly dominates Canada’s export interests, and often the Canadian government links the full implementation of WTO agreements (for example Government Procurement Agreements) to ‘moves it deems economically equivalent by the United States.’71 What this means is that presently, the NAFTA, and soon the FTAA, appears to play the greatest role in influencing Canadian government trade behaviour. However, as much as US trade policy dictates the moves of Canadian trade activities, the regional trade agreements such as CUSFTA, NAFTA, and soon FTAA defer to already established regulations in the GATT and WTO.
The GATT Article XX has been used often in decisions pertaining to actions taken on either behalf of the Canadian or American fisheries. Although not specifically mentioning the environment, this article has been most often relevant to these decisions is the trade versus conservation arguments, in particular ‘relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.’72 Insofar as the environment would be relevant, the GATT Article XX states that:
Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:
. . .(b) necessary to protect human, animal or plant life or health;
. . .(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption; . . .
Although Article XX can apply to fish products, they are not specifically dealt with in the GATT, and were not addressed during the Uruguay Round Agreement on Agriculture. As such fish products, although having the highest share of international trade for food, is treated by non-agricultural stipulations, and are thus considered in kind with industrial products.73 Under the GATT and WTO numerous cases have been heard which try to justify the necessity of raising barriers to trade on the basis of environmental concerns, the vast majority of which were ruled to be inapplicable and therefore the measures could not be maintained.74
John Kirton, Alan Rugman and Julie Soloway review a number of fisheries-related disputes between Canada and the United States to illustrate the impact of trade agreements upon the fisheries industry. 75 For example, in 1979 Canada was subject to a US embargo preventing the export of tuna and tuna products from Canada, and the GATT ruling concluded that although the US action could be understood as a measure of conservation of an exhaustible resource, but that it did apply the same restrictions to domestic producers and therefore the US embargo was impermissible.76 Resource conservation was again raised in 1988 when Canada claimed it needed to restrict the export of unprocessed herring and sockeye salmon – the GATT ruled against Canada under Article XX as the restriction was not applied to both foreign and domestic producers and therefore only penalized the US.77 Shortly thereafter, Canadian fisheries authorities complied with the GATT ruling and lifted the restrictions on herring and sockeye salmon, but instead imposed a mandatory Canadian landing requirement on 5 species of salmon for the purpose of conservation, allowing for biological samples as each catch was landed. The US complained, stating that forced Canadian landings restricted exports and forced fish to be processed in Canada as the wait was too long for the fish to enter the US. As the CUSFTA was recently negotiated, the US chose to mediate this dispute using the FTA (although the same regulations would apply given the fact that the FTA incorporated these provisions of the GATT).78 On two counts the Canadian measure was deemed illegal – first that the measure was not just a domestic measure but instead negatively affected and restricted trade with the US, and second that this could not be construed as a conservation measure as ‘the panel concluded that this was not the case, since it was highly unlikely that Canada would have imposed the same requirements “if its own nationals had to bear the actual costs of the measure”’ 79 However, such assumptions about the Canadian motives aside, the panel had also concluded that the Canadian government could forcibly land some catches while immediately exporting a minimum percentage of catches to the US. Canada understood this to mean that forcible landings were a legitimate conservation measure, contrary to the US focus on the alternatives available to Canada beyond landing requirements.80 In 1990 it was Canada’s turn to wage a complaint against US fisheries practices when the US restricted lobster exports from Canada on the basis of size. This measure was instituted on the basis of conservation in that it would allow US lobster to mature to a greater size before being caught. Canada argued that this discriminated against Canada since lobster in the colder Canadian waters mature at a smaller size that those in US waters.81 The US countered that lobster was treated the same regardless of origin (domestic and foreign lobster had to meet the same standards), and the FTA panel, split on the decision (3-2), upheld the US action stating that it was ‘“primarily aimed” at the conservation of US lobsters.’ 82 Kirton, et.al, further state that the FTA panelists who were not in favour of the ruling demonstrated the unfair basis of the Magnuson Act which openly protected US lobster fishers as they were subject, according to US authorities, to more stringent conservation regulations.83
As well, in the Kirton et. al. research, it was found that:
One of the most striking findings is how the outcome of issues over environmental regulatory protectionism have benefited the United States and its firms. Of the 50 cases effectively resolved, the United States has won 29, Canada 8, and Mexico 7, while 8 have been resolved to the mutual benefit of two or three of the North American partners. Such a pattern, with the United States prevailing in 58 per cent of the cases, would appear to be a further testament to the realist presupposition that in this bargaining domain as in so many others, the United States with its overwhelmingly superior power, is bound to prevail. 84
Even when adjusted on the basis of the size of the economies in question and the initial dominance each country has in the industry under dispute, the US has had over 67% success in fisheries-related disputes.
The role of the trade agreements and WTO – good, bad, and does it matter?
Does the World Trade Organization promote or demote the cause of human security, sustainable development, and a future healthy environment for all? The answer, not surprisingly, largely depends on one’s philosophical position – WTO supporters envision the WTO as the best mechanism by which to restrain ‘bad’ trading habits, including abuses of the environment, while promoting the good, such as lowering tariffs and adhering to the free trade mantras. WTO opponents see the WTO as a threat to everything that ‘is, or should not be, for sale’ such as human and environmental welfare and security. Who is right?
Kyle Bagwell and Robert Staiger argue that “the WTO serves as a moderating force over the temptations of its member governments to utilize their power to retaliate as a means of impinging on the sovereignty of their trading partners.”85 Where environmentalists and the like envision a threat to the ‘global commons’, and the ‘race-to-the-bottom’ in environmental standards in the pursuit of greater competitive advantage, Bagwell and Staiger argue that the WTO actually places restraints on countries that consider lowering their standards, but largely through a presently non-existent link between tariff obligations and changes in domestic standards (such that there would be a disincentive to lower standards).86 WTO principles have been designed, according to these authors, to limit the ability of participating nations to lower domestic standards in the interest of increasing competitive advantage. In this respect, if a nation were to lower its standards to increase its market share, it removes market access from other states participating in world trade, and therefore a complaint can be lodged against the offending nation via WTO rules. However, these same rules do not work in favour of raising domestic standards and therefore raise tariffs in the interest of preserving originally negotiated market access.87 Were they to do so, the door could open to abuse of protectionist measures in the name of improved domestic standards, and would largely defeat the very purpose of trade liberalization and the WTO.
As such, the advocacy of the WTO as vanguard of environmental principle and preservation is a tough pill to swallow, although as shown above, it has been known to happen. However, even advocates of the WTO recognize the inherent problems associated with an international trade organization attempting to safeguard an international and global resource. As Michael Weinstein and Steve Charnovitz state in their pro-WTO article published in Foreign Affairs, the WTO must strike a balance between open trade and protection of the environment which largely means nationally based protectionist measures.88 They also admit the inclination to lower environmental standards in the interest of increasing comparative advantage, but that this is mitigated by the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) and the Agreement on Technical Barriers to Trade (TBT), which allow for a particular measure of protection against potentially harmful (against health or environment) products based on scientific evidence (although scientific certainty is not required). This eliminates, in Weinstein and Charnovitz’s view, the need for the inclusion of the ‘precautionary principle’ that could open the flood gates to protectionism on the basis of next to completely unsubstantiated environmental and health fads and ‘zealotry’.89
In what ways have WTO principles and rules had an adverse affect on domestic standards, and in particular environmental ones as these are integrally linked to the natural resource industries? According to Carl Pope, the WTO may attempt to reduce subsidies to exports such as fish in the form of financial aid, but it does not eliminate the “subsidy- natural capital is being provided to the producer for less than the cost of replacing it,” 90 inclining industries to cut costs on the back of environmental degradation. As such, the definition of a subsidy as used by the WTO has an impact on the development and destruction of natural resources and their related industries.
Of course, if would take a much longer work to accurately assess the exact effects of Canadian (internal) versus international (external) pressures on the development of the Canadian fisheries, particularly with regard to the debate presented by Gordon Laxer at the beginning of this chapter. Without question, Canadian policy has been an influence on the development of its staples economy – from its National Policy to its subsidization of both fishers and conservation of fish stocks. In this respect Laxer is correct in allocating “blame” where it is, in part, due: the Canadian government itself. However, it appears that trade liberalization, from the pressures exerted early on by the colonizing country of Britain, to the perceived dependencies upon the US market for fish exports, has played an enormous role on the development, if not devastation of the industry. In this respect the Canadian government could have done much more in the way of first recognizing the severity of fish stock depletion as well as fostering a sustainable fisheries industry that met the needs of conservation and fisher communities. However, the Canadian fisheries have been exposed to a long-term and extensive process of liberalization, largely since the beginning of the fishing industry in the 1600s. Free trade agreements, manifested largely through the likes of the FTA, NAFTA and WTO merely reify a program of action that has persisted in the fishing industry already. Fisheries management has largely reflected a liberalized view over the period of the fisheries history, and only began to take a more scientific approach to fisheries management when it became more than apparent that the fisheries were in trouble. Even this approach has had its failings, as measurements have been unreliable, and have often not been taken into account until too late. The reason that the fisheries did not deplete faster than it has was largely due to the fishing capacity of Canada and foreign efforts, in that the bulk of fishing was shore-based. Once fishing went off-shore, the fisheries depleted rapidly as this event was not followed by more diligent and sustainably-oriented fisheries management.
The present relationship between the Canadian fishing industry and community, and trade liberalization as exemplified by the NAFTA and WTO reflects the antagonisms and contradictions apparent in a too-late recognition that largely unfettered trade in the fishing sector leads to depleted stocks and threatened ecosystems. The Canadian government has turned to a more conservationist fisheries management practice, but must now fight for the right to do so within the confines of NAFTA and the WTO. The Canadian government, and the Department of Fisheries and Oceans in particular, will more than likely defer to science as their guide in determining fisheries policy, rather than trade agreements. When science, however, has been and continues to be as imperfect as it is in providing accurate measures of fish stocks and environmental conditions, it becomes clear that trade agreements play a greater role than DFO might want to anticipate. Unless it can be ‘scientifically’ substantiated that a DFO measure which has the appearance of limiting or restricting trade is sincerely a measure intended for conservation, the trade agreements entered into by Canada will prevail and curtail such ‘protective’ measures. It goes without saying that some measures are disguised (sometimes well, sometimes less so) tactics to protect domestic fishers and fisheries, but it is also very possible that conservation, and protection of the fisheries, go hand in hand. As the examples of FTA and GATT rulings illustrate, a panel has to ‘judge’ on the basis of impressions whether conservation or protectionism dominates the nature of the measure taken. But these disputes, concluded, on-going, and future, are nevertheless ‘after the fact.’ Canada has truly suffered from the ‘tragedy of the commons,’ while it has also been one of the commons’ greatest exploiters, much to its regret at the end of the 20th century and the beginning of the 21st.
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