Canada has finalized a trade deal with Ecuador primarily focused on safeguarding mining interests amid local opposition. This agreement includes investor-state dispute settlement provisions, despite Ecuador’s constitutional ban on such practices. Critics argue that prioritizing corporate rights undermines democracy and environmental protections. Given the outcome of recent referendums and the need for constitutional compliance, the deal’s future remains uncertain.
This month, amidst the turbulence caused by President Trump’s tariff threats, Canada’s federal trade minister hailed the conclusion of a trade agreement with Ecuador. While one might perceive this as a strategic move to diversify Canada’s trade away from the United States, this agreement falls short; its projected economic gains of $80 million are negligible relative to Canada’s overall trade volumes.
The principal aim of the Canada-Ecuador trade deal appears to be the safeguarding of mining operations from local opposition in Ecuador, posing a threat to democratic processes. This agreement facilitates foreign investors’ ability to pursue legal action through international arbitration, contradicting Ecuador’s constitutional prohibitions. Such measures were contested by human rights organizations during public consultations conducted in 2023.
In 2008, Ecuador amended its constitution to prohibit investor-state dispute settlement (ISDS), a controversial mechanism that permits foreign investors to initiate litigation against host countries over regulatory actions affecting their business interests. Typically, ISDS cases are adjudicated by tribunals composed of international lawyers, which can lead to substantial compensatory awards against states, often reaching hundreds of millions.
Former president Rafael Correa’s administration effectively extricated Ecuador from international investment arbitration, nullifying investment treaties, including with Canada. In contrast, the current president, Daniel Noboa, is courting foreign mining investors and has sought to reintroduce ISDS, despite a recent referendum wherein Ecuadorians emphatically supported the constitutional ban.
The recent referendum result should have precluded the inclusion of ISDS in the Canada-Ecuador trade pact. However, it appears that Canadian interests in mining overshadow democratic commitments in Ecuador. Notably, Canadian mining firms are often criticized for human rights violations and have famously utilized ISDS to contest policies aimed at community welfare and environmental protection.
Canada itself has been subjected to significant ISDS claims, including those from Australian and U.S.-based firms. The Canadian government previously acknowledged the downsides of ISDS during the renegotiation of the Canada-U.S.-Mexico Agreement (CUSMA), wherein Trade Minister Chrystia Freeland argued against ISDS because it favors corporate rights over those of nation-states.
Despite this prior stance, the Liberal government’s focus on ISDS contradicts its previous declarations and stands at odds with actions taken by the European Union to abandon the Energy Charter Treaty due to its incompatibility with climate goals. As nationalism rises, Canadians must reject an imperialist framework in trade policy.
Although President Trump exemplifies the archetype of economic bullying, Canadian enterprises also engage in aggressive legal strategies against sovereign nations pursuing protective policies. With the Canadian Parliament currently paused and uncertain election outcomes in both Canada and Ecuador, the agreement’s future remains in question. Moreover, Ecuador’s courts must determine the constitutionality of the agreement’s investment clauses before it can be ratified.
In summary, the Canada-Ecuador trade agreement not only represents a meager economic strategy for Canada but also threatens Ecuador’s democratic processes by promoting investor rights over constitutional prohibitions. The growing reliance on ISDS undermines local governance and environmental protections. With public opinion firmly against ISDS, it is imperative that Canada reevaluate its trade policies in favor of sustainable development and equitable practices.
Original Source: www.policyalternatives.ca
