Legal Opinion: The Trans-Pacific Partnership and Implications for Postal Services in Canada

Share This

Thursday April 14 2016

Mr. Peter Denley
National Grievance Officer
Canadian Union of Postal Workers
377 Bank Street
Ottawa ON  K2P 1Y3

Dear Mr. Denley:

Re:

The Transpacific Partnership: Implications for Postal Services in Canada

You have asked for our opinion about the potential impacts of the Trans-Pacific Partnership (“TPP”) on the activities and mandate of Canada Post.  

The TPP has been described as “the most comprehensive trade agreement in the world,” and as you know, Canadian commitments under NAFTA and the GATS already impose broad constraints on the authority of Canadian governments at all levels to exercise their constitutional, legislative and regulatory prerogatives. Nevertheless, the TPP expands the scope of these constraints in several areas of public policy and law. While some of these concern matters of international trade, such as new tariff rules regarding trade in autos, many others predominantly concern matters of domestic policy and law, such as patent protection for pharmaceutical products, local procurement rules, the regulation of financial services, and importantly for present purposes, postal services.

The following analysis examines the extent to which the TPP, if implemented, would establish new rules that impinge upon a) the legislative and regulatory authority of the federal government concerning postal services, and b) the current and future activities of Canada Post. As explained below, the most important consequences of these expansive ‘trade’ rules are the following: 

  1. TPP rules concerning “Cross-Border Trade in Services” include a detailed annex on “Express Delivery Services” which would impose far more explicit constraints on government authority concerning postal services and the activities of Canada Post than do those in NAFTA or the GATS. These new rules would not only limit the ability of Canada Post to expand current services such as Xpresspost and those provided by its subsidiary Purolator, but would threaten its ability to maintain its current business model of integrated express delivery and letter mail services.

  2. TPP rules concerning “State Owned Enterprises” (SOEs) and monopolies also expand and make more explicit similar constraints in NAFTA and the GATS on the conduct of Canada Post in meeting its mandate to provide universal postal services to Canadians while maintaining a viable business model that includes express delivery services.

  3. The TPP expands the scope for investor-state dispute settlement (“ISDS”) which has proven to be the most pernicious feature of new ‘trade’ liberalization rules and one that many nations are now attempting to curtail. In so doing, the TPP raises the spectre of another protracted investor-state claim challenging the activities of Canada Post, like the UPS v. Canada case, this time buttressed by TPP provisions concerning SOEs and monopolies and the Annex on Express Delivery Services, which disparage the integration of monopoly (letter-mail) and commercial (express delivery) services that is at the heart of the Canada Post business model.

  4. TPP rules concerning postal services closely reflect the objectives of the private courier industry, notably Fedex and UPS, which committed substantial resources to influencing TPP negotiations. The objective of the industry is to curtail or even eliminate competition from public sector service providers, particularly in the market for express delivery services. In aid of that objective, the industry is seeking an enforceable right to take advantage of Canada Post’s national infrastructure (sales, collection and delivery) – without being encumbered by its public service obligations.

  5. In an economic environment in which advantage goes to the enterprise that can innovate and respond to new market demands, such as those being driven by e-commerce, the effect of the TPP rules is not only to lock public sector service providers into the status quo, but through new rules on express delivery services, SOEs and monopolies, and the “ratchet mechanism” - to ultimately reduce or even eliminate their capacity to compete in the new marketplace.

In reviewing the TPP, one is struck not only by its complexity, but also by the redundancy of rules that seek to limit the role of public sector postal services. These rules entrench a neo-liberal model that seeks, through deregulation and privatization, to reduce or eliminate the role of public sector service providers.

Given the determined efforts by and demonstrable success of the courier industry in shaping the formulation of TPP rules, it would be prudent to anticipate the aggressive use of the regime to promote the interests of this industry.  While this may ultimately result in trade challenges and investor claims, the more pervasive impacts are likely to be felt as a chill on government policy or regulatory reform concerning postal services as industry lobbyists will be quick to remind any government of the constraints imposed by the TPP.

In short, while TPP rules present no direct threat to the letter mail mandate of Canada Post, they impose significant constraints on its ability to maintain a business model that depends upon the integration of express package, courier and letter mail services – i.e. Xpresspost and the courier services of its subsidiary, Purolator.

Furthermore, TPP rules would establish new barriers that would limit Canada’s options for empowering Canada Post to respond to new challenges and emergent opportunities in the marketplace. Given the importance of courier and express delivery services to the Canada Post service model, and the vital role that innovation plays in the success of any business entity, it is not unreasonable to regard the TPP as presenting a material, as well as an existential threat to the future of Canada Post.

To our knowledge there are no putative benefits to be gained by Canada in respect of commitments pertaining to postal or courier services. Nevertheless, and although Canada had the authority to exempt the postal sector from some or all TPP rules as other parties – most notably Japan and Singapore – have done, the Harper government, for reasons it chose not to explain, declined to do so.

 

Please download the PDF below for the rest of the legal opinion which includes the following topics:

Section 1: Canada’s Current International Trade Commitments 

A. Canada’s Universal Postal System and International Trade Rules

(i) The General Agreement on Trade in Services (“GATS”)

(ii) The North American Free Trade Agreement (“NAFTA”)

B. The Courier Industry’s Influence on  International Trade Rules 


Section 2: Impact on Current Canada Post Services

C. Express Delivery Services Annex (Annex 10-B)

(i) Key provisions

(ii) Locking in deregulation and precluding future reform 

(iii) Can Canada Post maintain express delivery services post-TPP? 

(iv) Enforcement limited to state-to-state 

D. State-Owned Enterprises and Designated Monopolies Chapter (Chapter 17)

(i) Chapter 17 would create a powerful tool for states to attack Canada Post

E. Investment Chapter (Chapter 9)

(i) Key provisions

(ii) The reasoning of the majority in UPS v. Canada would protect Canada Post against investor-state claims, but it is not binding

F. Canada’s Failure to Include Adequate Reservations