Newfoundland Premier Danny Williams speaks with reporters after a meeting with Prime Minister Sephen Harper in St. John's on Jan. 29, 2010.Paul Daly
Prime Minister Stephen Harper is right that a precedent should not be set by Ottawa's acceptance of a $130-million liability, which has resulted from the expropriation of an asset of AbitibiBowater Inc. by the government of Newfoundland and Labrador, led by Premier Danny Williams. Yet this NAFTA lawsuit settlement is likely to stand as just such a precedent unless some visible, institutional change is made.
Mr. Harper said that if some future action by a province inflicts upon the federal treasury significant trade-litigation damages, a mechanism will be created to recover the money from the province in question.
But the federal government should not simply wait for the next problem of this kind to come up. It should diplomatically, but firmly, make clear to the provinces that it is thinking about specific options. For example, it would be worth considering drafting a bill based on the long-neglected federal trade power in the Constitution Act, 1867, which would empower the Crown in right of Canada to sue the Crown in right of a province, to recover damages paid by Canada because of a breach of NAFTA or some other trade treaty.
Rather than provoking a major federal-provincial confrontation by introducing such a bill in the House of Commons, the government could first refer it to the Supreme Court of Canada, seeking an opinion on its constitutionality.
In July, Lawrence Herman, an international trade lawyer at Cassels Brock & Blackwell LLP, wrote a lucid paper for the C.D. Howe Institute in which he showed that disputes under NAFTA have increasingly been about protection of investments - such as AbitibiBowater's former hydroelectric assets and water and timber rights in Newfoundland - while cases about trade in goods, such as the old familiar anti-dumping and countervailing duties lawsuits, have been withering away.
Fortunately, Canada is negotiating a free-trade agreement with the European Union in a way that explicitly implicates the provinces. If a treaty is agreed to, the provinces will be parties to it, unlike NAFTA. But Canada is part of North America, and NAFTA is and will remain very important.
Mr. Williams's sudden, high-handed expropriation of AbitibiBowater assets, complete with a one-sided setting of compensation, was indeed an unusual event, but he is not the first colourfully outrageous populist premier in Canadian history, nor will he be the last - nor is $130-million small change. The taxpayers of Canada need some concrete assurance that they will not have to pick up another such tab.