Ambiguity in TPP side letter about raw log exports to Japan
by Peter Ewart - 250 News
January 20, 2016
And so it goes with the issue of raw log exports from Canada to Japan under the recently signed Trans-Pacific Partnership (TPP) deal. In the negotiations, a side letter was agreed upon between the two countries that addresses log exports (1).
The Canadian government negotiators claim that this letter protects existing restrictions on these exports. However, the Japanese side appears to interpret the letter differently (2).
For example, the Japan Forest Products Journal (Oct. 23) claims that Canada has “agreed to ease” restrictions on raw log exports (3). According to a translation done by the Private Forest Landowners Association of BC, the Japanese Trade Journal (Oct. 10) has claimed the same thing. For its part, the Japanese government suggests that the TPP agreement will improve log export regulations and that this will result in higher prices for logs in Canada.
On the other hand, Rick Jeffery, CEO of the Coast Forest Products Association (which includes companies that export raw logs) says that the side letter maintains the status quo and does not involve lifting log export restrictions. Some analysts believe that the side letter with Japan and exclusion of log exports from the main TPP document are designed “to further restrict exports to the United States.”
But Rod Bealing, executive director of the Private Forest Landowner’s Association (which also supports lifting restrictions) says that there are “two different perspectives”, i.e. Japan’s and Canada’s, on the TPP side letter. He adds that “it’s not the clearest letter I’ve ever read in my life” (4).
Indeed, the text of the letter is both confusing and ambiguous. In the second paragraph it says that Japan and Canada agree to the creation of “a Bilateral Forestry Committee on Forest Products, which will undertake to review the necessity of safeguard mechanisms in the trade of forest products during the fifth year after the date of entry into force of the [TPP] agreement, and as a standing agenda item in each subsequent year thereafter.”
Furthermore, in the same paragraph, the letter goes on to state that, at the end of five years, “the Committee will also undertake to review the understandings between the Governments of Japan and Canada as described below.”
What is “described below” in the paragraphs that follow in the letter are statements asserting that existing Canadian raw log restrictions will not be affected by the TPP. Specifically, paragraph four states that “for greater certainty, Japan and Canada confirm that nothing in this letter shall have any other implications with respect to Canada’s existing practices and procedures relating to its existing measures concerning the export of logs of all species” and that “any dispute regarding a matter relating to the export of logs shall be settled under the WTO [World Trade Organization].”
Nonetheless, could not the statement in the preceding paragraph (i.e. “the Committee will also undertake to review the understandings between the Governments of Japan and Canada as described below”) be seen to overrule and nullify the content of paragraph four? In other words, could the door be opened? After five years, despite government claims that the status quo has been maintained (3), could Canada’s existing practices and procedures concerning the export of logs to Japan be up for a mandatory review and possible change?
If that were to happen, what if a dispute breaks out in the review committee between Canada and Japan over Canada’s restrictions on log exports, and this dispute can’t be resolved within the committee? This would not be surprising given Japan’s record of very aggressively pushing for the removal of these restrictions (see previous articles in 250 News here and here).
Under the TPP agreement, who ultimately gets to decide about trade disputes, including different interpretations of the TPP? Not Canada. Chapter 28 of the TPP lays out the Dispute Settlement process which empowers a three person panel to make decisions about disputes (5). Canada would appoint one person and Japan would appoint one person. A third person would be the chair. If the parties could not agree as to who the third person should be, then he or she would be selected randomly from a TPP roster of candidates.
Who gets to choose this roster of candidates? If there is no agreement between Canada and Japan, the TPP Commission (which is made up from representatives from all the 12 TPP participating countries) would do the choosing. Who would have more influence in the Commission? It is well known that the most influential and economically powerful players in the TPP are the U.S. and Japan.
If the panel found that Canada was wrong to insist on log restrictions (which it very well could as the purported aim of the TPP is to “promote economic integration to liberalise trade and investment”, i.e. to eliminate trade restrictions), it has the power to impose serious financial penalties if Canada did not comply as well as to allow Japan to take retaliatory action in other trade areas of the TPP.
It should also be noted that many believe that B.C.’s existing log export policy is already deeply flawed. Currently, logs can be exported if deemed “surplus to domestic needs”, a practice which encourages companies to “close mills, put people out of work and export logs rather than make forest products here at home” (6).
Given the stakes, what about revising the letter to clear up the confusion and ambiguities? No such luck. Canada’s new trade minister Chrystia Freeland has stated that any renegotiation of the TPP (and presumably the side letter) is impossible. According to her, “it’s a decision of yes or no” (7). In other words, if the new federal government formally ratifies this treaty (which was negotiated by the previous Harper government), Canada, and especially BC, will be locked into this massive, complex 6,000 page agreement.
Which brings us to an interesting question. Given the contentious and controversial nature of the raw log export issue in Canada (Canada exported a record 6.5 million cubic metres in 2013), why didn’t the Canadian negotiators demand and draft a clearly worded side letter with Japan that has no possible loopholes or ambiguities?
It is likely that at least some of the big forest companies in Canada, which are involved in both the export of logs and lumber, would have been consulted or even provided input into the drafting of the side letter. After all, as many observers have pointed out, the TPP is a creature of large globalized corporate interests who have had ongoing access to the negotiations right from the beginning.
Why didn’t these big forest companies insist on more clarity? Or did they want it ambiguous and unclear for their own reasons?
In any case, the side letter and the entire TPP agreement itself are extremely murky. The ancient Chinese general Sun Tzu once wrote: “Out of chaos, there is opportunity.” Some interests today might revise that to read: “Out of ambiguity, lies opportunity.“
But the question is: opportunity for whom?
Peter Ewart is a columnist and writer based in Prince George, British Columbia. He can be reached at: peter.ewart@shaw.ca .Notes:
1.“Letter from Canada.” Government of Canada. November 6, 2015. http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/tpp-ptp/text-texte/02-L-06.aspx?lang=eng
2.Dattu, Riyaz. “Japanese importers expect more from small TPP side letter on Canadian products.” Osler.com. November 25, 2015. https://www.osler.com/en/about-us/press-room/2016/japanese-importers-expect-more-from-small-tpp-side
3.Penner, Derrick. “Canada, Japan appear to have different understanding on raw log deal.” Vancouver Sun. December 15, 2015.
4.Mazereeuw, Peter. “Canada, Japanese importers at odds over TPP side deal.” Embassy. November 25, 2015. http://www.embassynews.ca/news/2015/11/25/canada-japanese-importers-at-odds-over-tpp-side-deal/47915
5.“Chapter 28. Dispute Settlement.” Trans-Pacific Partnership Agreement.”
6.Bercov, Arnold. Qtd. in “Here’s how cutting log exports could create B.C. jobs.” By Ben Parfitt. The Province. December 11, 2015. http://blogs.theprovince.com/2015/12/11/ben-parfitt-heres-how-cutting-log-exports-could-create-b-c-jobs/
7.Marowits, Ross. “Renegotiation of TPP not possible: trade minister.” The Canadian Press. January 15, 2016.
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