NAFTA decision may be good news for the PAP, and for magazines

[This post has been updated*]There may be significant long-term benefits for the magazine industry growing out of a decision announced Monday by a NAFTA arbitration tribunal in Washington. It concerned the case of UPS v. Government of Canada initiated under NAFTA’s Chapter 11. Part of the tribunal's decision has what may be precedent-setting implications for the Publications Assistance Program (PAP).

(Of course, in international litigation, especially when wading in the deep waters of the North American Free Trade Agreement, it is always a good idea to step cautiously.)

A release from Minister of International Trade David Emerson and Lawrence Cannon, Minister of Transport,Infrastructure and Communities and a brief backgrounder are available from the Foreign Affairs and International Trade Canada website. The full text of the decision is not yet available, but the particulars are interesting because it appears to say that government measures like the Publications Assistance Program are exempt from NAFTA under its disputed "cultural exemption".

NAFTA Chapter 11 provides rights and protections for investors and investments in member countries. Companies that believe these investor rights have been violated can take the matter before an impartial arbitration tribunal.

UPS had initiated a challenge in January 2000, claiming not less than US$ 160 million in damages. It alleged that Canada Post was benefiting from undue privileges as a government-owned corporation, that Canada Post got preferential treatment from Canada Customs, that its pricing policies gave it an unfair advantage and that Canada Post unfairly favoured its subsidiary (and direct UPS competitor) Purolator.

Of particular interest to the magazine industry was UPS's concurrent claim that the Publications Assistance Program of the Department of Canadian Heritage is contrary to Canada’s national treatment obligation because it requires publishers to deliver their publications through Canada Post to obtain the subsidy.

The Canadian Heritage Publications Assistance Program was upheld as a measure designed to assist cultural industries and therefore fell within the scope of NAFTA’s cultural exemption. In any event, the tribunal found there was no violation of national treatment.

The tribunal's final decision said that Canada had met its NAFTA obligations and dismissed UPS’s claim for damages. It ordered the parties to bear their own costs and share equally the cost of the arbitration.

*A story in the news site Reclaim the Media quotes Moya Green, the president and CEO of Canada Post saying:

"For years, UPS has made allegations of unfair competition in Canada, and in every instance the allegations have been rejected by regulatory agencies and independent experts. And now the international tribunal has ruled that the allegations have no foundation."

Deborah Bourque of the Canadian Union of Postal Workers said:

"We are very happy that the tribunal rejected UPS's complaint but that doesn't mean we think NAFTA works. NAFTA allowed UPS to put public postal service and jobs on trial -- a secret trial. The public and workers should have the right to be heard when their jobs or public services are threatened."