Capital Rules!

The economy has radically changed since the era when Adam Smith championed the 'upstart' businessmen who dared to challenge the merchant monopolies that dominated the economy of his day. For Smith, the government created monopoly distorted the market, and granted unfair privilege and power to one sector of the population. In his view, this privilege could not be justified. It is highly unlikely Smith could have foreseen the day when private power would become so great that it would be possible for mega-corporations to sue governments for damages, and win! For reasons Similar to Smith's, I view NAFTA as a means by which Canada institutionalizes its subordination to American corporations.

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This is a costly and dangerous development in Canada’s recent history, and Canadians would do well to seek substantial changes to existing trade agreements. In this paper we shall examine some of the costs associated with NAFTA. Then we will look at the incentives American corporations have for wanting to use Canada as a peripheral resource supplier while blocking any independence Canada may try to exert. In closing we will look at how these incentives help develop the duplicitous nature of “free trade”.

The same pattern of Canadian subordination emerges when we look at Canadian efforts to control hazardous materials. In 1995 Canada announced a ban on the import of PCB contaminated waste. S.D. Myers Inc. of Ohio sued the Canadian government for compensation over lost profits because of this ban. S.D. Myers Inc. was awarded $50 million for damages, and after only two years the ban was lifted. Similarly, when Canada banned the use of MMT in gasoline, a suspected neurotoxin, Ethyl Corp. hit back with a $250 million law suit. Even though the chemical is harmful to human health and the environment, technically it violated aspects of Chapter 11, and Ethyl Corp. won their case. The ban was terminated and Canada had to pay $20 million in damages. These legal cases should send a very clear message to Canadians - any effort to limit the influx of hazardous chemicals will be penalized since substantial elements of environmental protection are no longer in the hands of Canadian legislators. This is not a happy situation for those who feel the government should be able to protect its citizens from toxic chemicals, if citizens so desire.

Canadians would do well to seek substantial changes to existing trade agreements.

One final example is in order to illuminate the willingness of American capital to “leave no stone unturned” in its hunt for profit. The United Parcel Service (UPS) charged that because Canada has a federal postal service, Canada discriminates against UPS and violated the terms of NAFTA. They brought a $230 million case against Canada that took nearly seven years to resolve. Moya Greene, president and CEO of Canada Post, told CBC that “this dispute was about money” and that the:

United Parcel Service of America is attempting to force postal administrations around the world out of the parcel and courier business in order to increase their market share.

While we should be pleased that this case was dismissed in 2007, the critical point here is that NAFTA has been used to advance goals that are decidedly not in the interests of Canadians. Clearly NAFTA represents a point of leverage American capital is using to “pry open” the country, and will pursue this goal regardless of how Canadians feel about it.

The role of Canada as a “peripheral” region, whose primary function is to supply other “core” areas with raw materials was a fairly established position, before NAFTA came to be. Canada was first used as a hinterland for the British, then later the Americans. After WWII, when America was positioned to become a major world power, state planners sought to secure access to essential resources needed to keep their economy buoyant. A presidential commission was established after the war to delineate what critical resources America needed, and who had them. Canada was identified as a source for thirteen of the twenty-two “key” resources America sought (Clement). Canada, failing to anticipate the problems associated with developing an export dependent economy, embraced this role. Canada’s deputy minister of finance Kenneth Taylor referred to the report stating, “I keep it in my desk, and every time I get depressed about the future, I take it out and read it” (Ibid). This policy of export driven development had very real effects on Canada’s development. One of the most telling signs of this North/South (as opposed to east/west) orientation is the network of 100 international power lines connecting Canada to America, verses the 35 inter-provincial lines (Ibid). Admittedly this method of development was a tenable option when America was a global titan, and Canada’s resources were at their height. After the US began to falter in the 1970’s and Canada’s resources began to dwindle, the illogic of this plan became more apparent. After America reinvented itself as the neo-conservative “lean” state under Ronald Regan, a corollary to this new USA was the need for heightened access to Canada’s resources. It also sought institutional arrangements that would ensure Canada could not pursue an independent course. NAFTA was developed as the means to achieving this goal. Chapter 11 gives American capital much more power over the Canadian state than was possible before. NAFTA in effect establishes “capital rule” in Canada.

It is interesting to note that “free market” rhetoric aside, NAFTA has not affected many of America’s protectionist legislations and general tendencies. Both Regan and Bush I have been charged as being the most protectionist presidents ever. Almost one-third of the domestic market for manufactured goods is protected. Both have used quotas, voluntary export restraints, rules of origin, customs practices, and health regulations to limit access to the American market. Well over thirteen explicitly protectionist American legislations were not affected by NAFTA. The hypocrisy of the situation is transparent. Canada must abide by the principles of free trade; America is allowed to “protect its interests.”

The problems of NAFTA are serious. In some respects, it makes little sense to talk of Canada as a nation as long as it is subordinate to American capital. The century facing us is likely to be filled with even more astonishing advances in corporate power and cohesion. If we hope to have a nation worth living in at the end of the 21st century, it is crucial that NAFTA be reworked or dismantled. No nation can endure the machinations of unrestrained capital for very long without falling into total ruin.


Clement, Wallace. Understanding Canada. Montreal & Kingston: McGill-Queens, 1997.

Hoogensen, Gunhild. “Fostering Development from the Semi-Periphery: Canada’s pursuit of development objectives in the face of globalization,” Diversity in Development - Universal and Local Discourses. Tromso, 2001.

See “Canada Post claims victory at NAFTA over UPS” available at