Is contracting out to U.S. policy-laundering?

B.C. ministers said they'd get tough with Americans on trade, but they're using treaty-obligations excuses to award contracts south

Before the election, B.C. cabinet ministers took to fulminating against the U.S., threatening that the province would stand up and not take any more American bullying over trade issues. Agriculture, Food and Fisheries Minister John van Dongen called for the feds to stop allowing U.S. cattle to be shipped through B.C. Forestry Minister Mike de Jong blustered that B.C. should block California wines at the border. De Jong even threatened to slow down B.C.'s regulatory review of the proposed Alaska pipeline.

This kind of populist talk plays well in rural B.C. communities hit hard by the closing of the American border to Canadian beef-costing the Canadian industry $7 billion-and the imposition of $4 billion in U.S. softwood-lumber duties.

But isn't this the government that repeatedly awarded lucrative contracts to American firms? If the government really wanted to show the Americans that it wasn't going to take it anymore, wouldn't it be easier to simply stop handing over hundreds of millions in B.C. taxpayers' money to American corporations?

At the same time that B.C. ministers were promising to get tough with the Americans, word leaked that the government was reviewing bids from three U.S. corporations to take over BC NurseLine, a service that provides round-the-clock health information to the province's residents by phone.

The contracting-out of BC NurseLine was only the latest in a series of Liberal government deals that would open up profit opportunities for American companies in B.C. public services. Gordon Campbell personally pointed the way early in his government's mandate. In the spring of 2002, he had a meeting in New York with Richard Scott, the former CEO of the largest U.S. for-profit hospital corporation: HCA/Columbia. Campbell invited Scott to come to B.C. to advise the government on health care, describing him as "an invaluable resource for government leaders, like myself, who see the need to reform and rebuild health care".

Given Scott's history of privatizing public hospitals, Campbell was very much asking the U.S. fox up to dine in the B.C. hen house. Scott was disinvited after the Hospital Employees' Union publicized why he was no longer with HCA/Columbia. His board had asked him to resign when the FBI launched raids on the company's hospitals over reports of Medicare fraud.

The B.C. government had a perfectly valid reason to turn down American contractors in the health-care field. Delivery of the BC NurseLine program by an American corporation raises the same threat to privacy that the privacy commissioner found in the government's deal to have the PharmaCare and MSP programs run by a Canadian subsidiary of the U.S.-owned Maximus Inc. The privacy commissioner's report stated that there was a reasonable possibility that U.S. courts could order U.S. corporations to disclose records held by their Canadian-based subsidiaries. The commissioner concluded that the U.S. Patriot Act increased this possibility.

The B.C. Civil Liberties Association pointed out in its submission to the privacy commissioner that the government was putting at risk the highly confidential information included in British Columbians' personal health files. In the association's view, "Because there is no need to outsource to a foreign company, the risk is being assumed voluntarily." In other words, the government was making a choice: privatization takes priority over protecting privacy.

The government came up with a kind of "NAFTA made me do it" explanation for why it had no alternative but to let American companies in. It stated in its submission to the privacy commissioner: "The Province submits that a fair and rational person would not consider it reasonable to expect public bodies to exclude companies with U.S. connections from bidding on contracts where to do so would violate international treaty obligations."

However, excluding U.S. companies would not violate any existing international treaty obligation. According to Noel Schacter, a former director in B.C.'s trade department, there is no reason under trade agreements that B.C. would have to allow American companies to bid on government contracts. "Currently, trade agreements have exclusions for government procurement by the provinces," Schacter said. "At this point, provincial governments do not have to treat American companies the same as Canadian ones when they contract out services."

Schacter explained, though, that once an American company has been chosen for a contract, under NAFTA they could sue for compensation if government action caused damage to their investment. NAFTA requires governments to pay if they are found to have expropriated an investment, even if no actual loss of property is involved and governments can demonstrate they are acting for a public purpose.

So the jeopardy from trade agreements results not from the government rejecting a bid by a U.S. company. It comes from selecting a U.S. contractor who then enjoys NAFTA rights to sue that are superior to what Canadian companies have under domestic law.

The B.C. Civil Liberties Association described the government's use of international trade treaties to rationalize its actions as "policy laundering". This term is defined in the privacy commissioner's report as "the process by which a government implements what would normally be a controversial policy at home claiming that its international obligations force it to do so", which seems to be a perfect description of what the government did in defending the Maximus deal.

The B.C. Liberals actually had the ability to keep control over their own purchasing decisions, if they wanted to. Other countries are keen to get government purchasing by Canada's provinces covered by trade agreements. They are pursuing this prize in a variety of trade negotiations set to conclude this year, the talks to expand the WTO's General Agreement on Trade in Services and the Government Procurement Agreement, to name just two. B.C. should tell the federal government in no uncertain terms that it will not allow its purchasing decisions to be governed by trade rules.

But the Liberals seem to welcome international constraints that allow them to talk tough with the Americans while claiming they are helpless to take effective action.