NAOMI KLEIN

Wednesday, February 28, 2001

Anyone still unclear about why the police are  constructing a modern-day Bastille around Quebec  City in preparation for the unveiling of the Free  Trade Area of the Americas should take a look at a  case being heard by the B.C. Supreme Court. In  1991, Metalclad, a U.S. waste management  company, bought a closed-down toxic treatment  facility in Guadalcazar, Mexico. The company wanted  to build a huge hazardous waste dump and promised  to clean up the mess left behind by the previous  owners. But in the years that followed, they  expanded operations without seeking local approval,  earning little good will in Guadalcazar.

 Residents lost trust that Metalclad was serious about  cleaning up, feared continued groundwater  contamination, and eventually decided that the  foreign company was not welcome.

 In 1995, when the landfill was ready to open, the  town and state intervened with what legislative  powers they had available: The city denied Metalclad  a building permit and the state declared that the area  around the site was part of an ecological reserve.

 By this point, NAFTA -- including its controversial  "Chapter 11" clause, which allows investors to sue  governments -- was in full effect. So Metalclad  launched a Chapter 11 challenge, claiming Mexico  was "expropriating" its investment. The complaint was  heard last August in Washington by a three-person  arbitration panel. Metalclad asked for $90-million  (U.S.), and was awarded $16.7-million.

 Using a rare third-party appeal mechanism, Mexico  chose to challenge the ruling before the B.C.  Supreme Court.

 The Metalclad case is a vivid illustration of what  critics mean when they charge that free-trade deals  amount to a "bill of rights for multinational  corporations." Metalclad has successfully played the  victim, oppressed by what NAFTA calls "intervention"  and what used to be called "democracy."

 As the Metalclad case shows, sometimes democracy  breaks out when you least expect it. Maybe it's in a  sleepy town, or a complacent city, where residents  suddenly decide that their politicians haven't done  their jobs and step in to intervene. Community  groups form, council meetings are stormed. And  sometimes there is a victory: A hazardous mine  never gets built, a plan to privatize the local water  system is scuttled, a garbage dump (such as the one  planned for Kirkland Lake north of Toronto) is  blocked.

 Frequently, this community intervention happens late  in the game and earlier decisions are reversed.  These outbreaks of grassroots intervention are  messy, inconvenient and difficult to predict -- but  democracy, despite the best laid plans, sometimes  bursts out of council meetings and closed-door  committees.

 It is precisely this kind of democracy that the  Metalclad panel deemed "arbitrary." Under so-called  free trade, governments are losing their ability to be  responsive to constituents, to learn from mistakes,  and to correct them before it's too late. Metalclad's  position is that the federal government should simply  have ignored the local objections. There's no doubt  that, from an investor perspective, it's always easier  to negotiate with one level of government than with  three.

 The catch is that our democracies don't work that  way: Issues such as waste disposal cut across levels  of government, affecting not just trade but drinking  water, health, ecology, and tourism. Furthermore, it  is in local communities where the real impacts of  free-trade policies are felt most acutely.

 Cities are asked to absorb the people pushed off  their land by industrial agriculture, or forced to leave  their provinces due to cuts in federal employment  programs. Cities and towns have to find shelter for  those made homeless by deregulated rental markets,  and municipalities have to deal with the mess of  failed water privatization experiments -- all with an  eroded tax base.

 There is a move among many local politicians to  demand increased powers in response to this  offloading. For instance, citing the Metalclad ruling,  Vancouver City Council passed a resolution last  month petitioning "the federal government to refuse  to sign any new trade and investment agreements,  such as . . . the Free Trade Area of the Americas,  that include investor-state provisions similar to the  ones included in NAFTA." And on Monday, the  mayors of Canada's largest cities launched a  campaign for greater constitutional powers. "[Cities]  are listed in the constitution of the late 1800s  between saloons and asylums and that's where we  get our power, so we can be offloaded [and]  downloaded," explained Joanne Monaghan,  president of the Federation of Canadian  Municipalities.

 Cities and towns need decision-making powers  commensurate to their increased responsibilities, or  they will simply be turned into passive dumping  grounds for the toxic fallout of free trade. Sometimes,  as in Guadalcazar, the dumping is plain to see.

 Most of the time it is better hidden.