The system works - leave it alone

National Post
Wed 12 Jan 2005
Page: FP19
Section: Financial Post: Comment
Byline: Robert Wolfe
Source: Financial Post

The drawn-out mad cow crisis, along with perennial trade irritants such as softwood lumber, vexes those who believe Canada needs to create stronger, more centralized institutions to manage our shared North American economic space. Such new institutions, they assert, must extend or supersede NAFTA, be treaty-based and demand comprehensive negotiations to get the attention of the Americans.

I disagree. Put simply, it is folly to think the complexity of Canada-U.S. economic relations can be codified and administered in a single treaty. The two countries have been drawing up issue-specific treaties and creating organizations to manage the complexities of their relations for more than 200 years, and NAFTA is but one among many vehicles of co-operation. Provinces are members of U.S. state associations, thousands of firms have integrated cross-border operations and countless standard-setting and regulatory bodies co-operate with regard to industrial and commercial practices. There is no reason to believe, all of a sudden, that these dynamic relationships have become insufficient for managing the continental economy.

In the article above, Armand de Mestral suggests giving "direct effect" to selected provisions of NAFTA as a way to deal with increasing economic integration (and the inevitable disputes that arise), since ordinary citizens -- rather than governments -- would be able to enforce them in Canadian and U.S. courts. By expanding authority to private actors, he asserts that trade disputes can be resolved more quickly and justly than is currently the case.

But it is debatable whether the cross-border disputes we face in North America are best solved in courts. Their independence and small number limit the range of issues they can (or choose to) hear, and their formality raises costs of participation. The "citizens" most likely to benefit from direct effect are large firms and trade associations with the resources to mount expensive litigation, rather than individuals or diffuse interests who remain skeptical about the benefits of NAFTA.

More worrying, direct effect could effectively entrench NAFTA as a device comparable to a constitution that holds the state accountable. This would, for good or ill, place constraints on domestic policy-making, creating potential obstacles to Canadian democracy and threats to the legitimacy of vital co-operation with our neighbours.

The mad cow crisis that closed U.S. markets to Canadian beef starting in May, 2003, illustrates how existing decentralized protocols and agreements are more effective tools for managing Canada-U.S. relations than direct effect or other centralist treaty-based approaches. It took only a month for Canadian authorities to conclude that the single case identified had not passed the disease on to other cattle or to humans, and U.S. and international experts monitoring the investigation agreed. Less than three months after the case was discovered, the U.S. agriculture secretary announced that the border would reopen to imports of boneless beef from animals under 30 months of age. Restoring Canadian access to the U.S. market for live animals was not possible, however, under U.S. rules (ironically, Canadian rules as they then existed would have blocked imports from the United States under the same circumstances).

U.S. officials worked rapidly to rectify this problem. In early November, 2003, the U.S. Department of Agriculture issued a proposed rule that would place Canada on a list of "minimal risk" countries for BSE, allowing imports of live animals. The process was delayed somewhat by the discovery of a second BSE case in Washington state in December, 2003, and then further delayed by a mid-2004 decision prohibiting any interim relaxation of the restrictions by the U.S. District Court in Montana in response to a petition from a ranchers' lobby group.

The fact that a judicial decision significantly delayed full resolution of the mad cow crisis should serve as a warning to those who believe direct effect (or any other judicially based mechanism) is the preferred solution to trade dispute resolution. U.S. authorities are ultimately accountable to Congress (and must respect court decisions). No overarching treaty, however comprehensive, can force regulators to abrogate this responsibility.

The lesson from the mad cow crisis is clear: Close networks among food-safety administrative and regulatory bodies, through the accumulation of agreements and understandings over many years, allowed U.S. officials to conclude that the Canadian regulatory system looks much like their own, and that both are consistent with the rules of the World Organization for Animal Health (OIE). No court can enforce such trust. No outside institution could have had sufficient information or expertise to move the process more quickly.

While it is conceivable Canadian ranchers could have mounted a judicial challenge in U.S. courts if the NAFTA food-safety provisions had been given direct effect, litigation would have been expensive and almost certainly much lengthier, as a group of Canadian ranchers who tried to use Chapter 11 of NAFTA for this purpose have discovered.

Existing institutions have time and again proven their ability to deal effectively with the occasional conflicts and crises that buffet Canada-U.S. relations, but they must constantly evolve to accommodate deepening Canada-U.S. ties. Proposals for top-down centralized treaties or institutions that simply require officials to do what they have been trying to do for decades will contribute little, if anything, to improve on the kaleidoscope of institutions that serve us so well today.

Edition: National
Story Type: Business; Opinion
Note: Robert Wolfe, a professor at the School of Policy Studies, Queen's University, is author of "Where's the Beef? Law, Institutions and the Canada-US Border" (Institute for Research on Public Policy), published today.
Length: 864 words