OTTAWA, Ont. – United Parcel Service of America is taking Canada’s federal government to court in a $230-million lawsuit under the North American Free Trade Agreement. It’s the first time the deal’s competition provision has been used to attack a government monopoly.

The courier giant is charging that the feds have failed to properly regulate Canada Post, and is accusing Canada Post of using regular letter deliveries to subsidize courier services that include XpressPost, Purolator and Priority Courier.

If Canada Post loses, it could be forced to dump its majority stake in Purolator, set it up as a separate entity, or simply leave the business.

Chapter 15 of the trade agreement keeps government monopolies from using “anticompetitive practices in a non-monopolized market,” including “cross-subsidization or predatory conduct.”

At the heart of a case is a 1996 government study that concluded Canada Post was using its publicly funded service to help its courier arm.

Canada Post shares trucks and planes between its various services, and does not sell other courier products at its retail outlets. n