The Volcker Rule Doesn't Violate NAFTA
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passing the Congress and signed by the President, superceding previous laws when in conflict with them, and being superceded by laws conflicting with them that are passed after the Congressional-Executive Agreement was.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to sue in US Courts claiming that NAFTA cannot be applied to the Volcker Rule, since the law authorizing that rule repealed an aspect of NAFTA in a manner that was completely legal under the US Constitution.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.
(Cross-posted from New Economic Perspectives.)