Trade Agreement Gone Long: Signs of Life Seen in Canada-EU Trade Agreement

Will Klanac - 3B Mechanical
Posted on: November 5, 2016

At the Canada-EU summit this past month, Canadian Prime Minister Justin Trudeau signed off on a trade deal that has been in the works for over nine years. Solidarity for the Comprehensive Economic and Trade Agreement (CETA) was struck in Brussels on October 30, shortly after obtaining buy-in from Belgium – the last country to assent. CETA has been pushed along a rocky path to get here, and from the looks of it, it won’t get any smoother going forward.

We first travel back to our best estimate of the beginning: the 2007 Canada-EU summit in Berlin. Back then, both parties saw an opportunity to grow closer economically, and agreed to work on a joint study that would analyze the drawbacks and advantages for that situation. Following this, in 2009, negotiations for the agreement opened at the next summit in Prague. These continued without notice until August 2014, when part of the draft agreement was leaked by German television station ARD. One month later, there was an official announcement that talks had finished.  On initial reveal, the primary benefit of the agreement was highlighted as the elimination of most tariffs between parties, and the flourishing trade purported to follow. However, since the full release of the document, there has been rising protest by citizens of both Canada and the EU.

Now, what exactly is being protested? In Canada, there is an emphasis on the issue of public procurement. Concern for the former is rooted in restrictions that the agreement imposes on the ability of Canadian municipal and provincial government organizations. If goods and services or construction acquisitions above a certain value are performed by these bodies, they are not permitted to be biased in their choice of supplier based on its party of origin. The direct result of this is a conflict with existing programs that aim to support local industry by reserving business for them.

More recently in Europe, the spotlight fell on Wallonia, a French-speaking part of Belgium. Their opposition of CETA on the brink of the 2016 Canada-EU summit drew the eyes of onlookers to them and their sentiments. Fears of being drowned out by cheaper Canadian imports were expressed by some, mirroring sentiments held by our very own dairy farmers. These were assuaged with the help of two declarations: one made by both Canada and the EU, and the other by the Belgians. The first of the two clarified the ability to regulate and the right to protect resources, and made amendments to an Investor State Dispute Settlement (ISDS) system proposed by CETA. On that same note, the Belgian declaration stressed that ISDS articles would not come into effect until the agreement was ratified, and that their ratification was contingent on changes being made to it. With that, the politicians of Wallonia relented.

Four words may be enough to get a notion of what ISDS is, but they are not nearly enough to stress the weight it holds in these negotiations. Through the ISDS, investors from one party, with stakes in the assets of another, can sue the second party for damage and mismanagement, among other reasons. Critics claim this undermines existing avenues for pursuing this action, and unnecessarily empowers corporations with the reach to achieve this. For Canada, this is a particularly sensitive issue due to its history of disputes under NAFTA. The Canadian Centre for Policy Alternatives reported 35 NAFTA claims against Canada as of the beginning of 2015, with paid damages exceeding $172 million CAD.

And so once again progression slowed to a crawling pace. Canadian representatives now need to introduce federal legislation to put the agreement into place here. On the other side of the Atlantic, the European Parliament will vote to ratify CETA, and pending success, each nation in the EU must repeat the same process individually. All we can do now is close our eyes until the next summit and wait patiently for the surprise.