This one is for the Finance Minister of Canada, Joe Oliver. He erroneously claims that the Volcker rule, implemented as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, violates The North American Free Trade Agreement (NAFTA), signed into law on December 8, 1993.
Oliver says that the Volcker Rule prohibits US banks from trading AAA rated Canadian Government debt thereby violating free trade under NAFTA. The US government has denied any such violation.
I think the US Government has the better of this one. And it’s interesting to consider why this is true.
According to our fundamental legal document, the Constitution of the United States, NAFTA isn’t a treaty concluded by the United States with Canada and Mexico. Instead it is what is known as a Congressional-Executive Agreement (CEA). The difference between such an agreement and a treaty, is that a CEA requires presidential approval and plurality votes in both Houses of Congress legislating the agreement; while a treaty requires presidential submission of a negotiated agreement to the Senate for ratification by 2/3 of that body.
Another difference is that a treaty takes precedence over mere laws. It is subordinate only to the provisions of the Constitution itself. In contrast, Congressional-Executive Agreements have no explicit status in the Constitution and amount to no more than new legislation passing the Congress and signed by the President, superceding previous laws when in conflict with them, and being superceded by laws conflicting with them that are passed after the Congressional-Executive Agreement was.
Since, the Dodd-Frank Act with its Volcker Rule was passed long after NAFTA was, it follows that where it conflicts with NAFTA it does not violate the earlier Act, but actually repeals that aspect of it mandating free trade in Canadian debt instruments in a manner completely consistent with the US Constitution. Further, if a multinational financial corporation were to take this case to an Investor State Dispute Settlement (ISDS) tribunal, and win the case, then the US Government would be well within its rights to sue in US Courts claiming that NAFTA cannot be applied to the Volcker Rule, since the law authorizing that rule repealed an aspect of NAFTA in a manner that was completely legal under the US Constitution.
Those following my reasoning closely, may recognize that the general pattern of argument advanced here would be applicable to any “Free Trade” agreement negotiated by the United States as a Congressional-Executive Agreement, including the Trans-Pacific Partnership (TPP) and other agreements being negotiated right now. That means that any one of them could have any or all aspects of “free trade” under a Congressional-Executive Agreement, repealed by a new law passed after the trade agreement.
So, all that would have to be done to repeal TPP is to pass a new law constraining “free trade” by requiring that such disputes be adjudicated in the judicial systems of the signator nations, and stating that the US would not recognize any decisions made by any international ISDS tribunals established under the authority of the TPP. This can be done as soon as we have a new Congress where a majority of both Houses of Congress are committed to such a repeal, along with a President who has made the same commitment and is willing to carry it out.
So, in case the worst happens and TPP is passed by the House, we can do something about it by seeing to it that all those who supported it in both parties are defeated in 2016, and that no presidential candidate in 2016 who dares to support the TPP is elected, making it very likely that the new Congress and the new President are committed to repeal. So, let us join together to defeat the TPP before it passes, but, in addition, let us resolve that whatever happens in the House or in the Senate, we will not accept the passage of an Act that threatens US sovereignty on a daily basis, and that instead, we will mobilize against the TPP, make it a 2016 election issue, and make our elected representatives who defect and vote for it sorry they ever heard of the TPP and its ISDS tribunals.
The same reasoning applies to the Iran deal, but when some Congressmen tried to point that out they were vilified.
Still, I think that Canada has reason to be offended, to feel like we’ve gone back on our word. The Founders were not dummies, we should pay more attention to their concerns, not put so much effort into trying to circumvent the limits they put on government power.
Another difference is that a treaty takes precedence over mere laws. It is subordinate only to the provisions of the Constitution itself.
Joe, this is not true. Treaties are on the same level as federal law, not a higher one, and of course both are subordinate to the Constitution. Wikipedia’s Treaty Clause is very good on such matters. Congress can repeal the domestic force of a Treaty or Agreement by just passing a later law. But it cannot remove the international obligation; the distinction between Treaties & Agreements is a purely internal, domestic matter. Considering the power of the USA, in any realistic scenario the USA has very little to worry about by just breaking a treaty this way. This may not be so true of smaller states.
Hi Cal, generally, I agree with this comment. But there are ways in which treaties have more far-reaching authority than Congressional-Executive Agreements. Citing the Wikipedia article:
So, there are things that a treaty can do which a Congressional-Executive Agreement cannot, giving treaties a bit higher status than Congressional-Executive Agreements. In the case of the Trade Agreements this difference may be crucial. For example, insofar as the States have generalized power to provide for the general welfare of their citizens which the Federal Government cannot breach, Congressional-Executive Agreements would not be sufficient for an international authority in the first place place because such an agreement cannot exceed the authority of Congress and the Executive to supercede certain rights reserved for the States and the people under the Constitution.
In this respect treaties have more scope as the example of Wikipedia illustrates. Apart from this, however, the proper way of terminating international agreements of various types is a legal tangle, on which the Supreme Court has never imposed any clarity. Given the way Congressional-Executive Agreements are concluded, it hardly seems possible that any more rigorous procedure would be needed to terminate them. Either their rejection by the Executive or the Congress (by majority vote of both Houses would appear to suffice.
With Article II treaties however, there has been no ruling on whether they may be terminated by the President alone, or the President and Congress by majority vote of both Houses, or whether they must be terminated either by the President alone, the Senate by a 2/3 majority alone, or by both. My own view is that if a treaty must be ratified by the President with the advice and consent of 2/3 of the Senate, then either 2/3 of the Senate or the President ought to be able to withdraw that ratification to terminate that treaty. But that ruling has never been made from the Supreme Court, and historically treaties signed by the United States have been terminated by Presidents or Presidents and the Congress when they wanted to do that.
You point that according to international law, such a termination would not relieve the United States of its treaty obligations, and that is true for what it is worth. But since the United States is a sovereign state, international law is more custom and tradition than it is positive law, and if the United States or other nations decide to reject an obligation under international law, there is very little to do about it except engage in a war to enforce a dubious obligation that may not be recognized by the people of the nation that has terminated the treaty anyway.
IN any event. going back to the present case, since NAFTA is not a treaty, but a Congressional-Executive Agreement, it, or any of its parts may be repealed by passing a new law. With reference to the complaint of Joe Oliver it is clear that insofar as Dodd-Frank and the Volcker rule, in particular, is in conflict with NAFTA, then it follows that the part of NAFTA it is in conflict with is now null and void, even if the rest of the “treaty” has not been superceded by later actions of Congress and the Executive.
Joe Oliver is not the brightest bulb in the bunch–See: http://www.cbc.ca/news/business/tfsa-changes-a-problem-for-stephen-harper-s-granddaughter-to-solve-joe-oliver-says-1.3043841
And too: http://www.macleans.ca/politics/joe-oliver-budgets-do-not-balance-themselves/
Any Finance Minister who thinks balancing the budget is more important than spending for achieving full employment is proof of the existence of the “Peter Principle.”