By Jose Corte-Real
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The Future Model for European Trade Deals?
After seven years of negotiations, the landmark Comprehensive
Economic and Trade Agreement (CETA) was signed on October 30, 2016. The
agreement, which has been touted as a major success for the future of EU trade
deals, has also been the target of criticism and protests. With approval from
the European Parliament and the Canadian Parliament, 90% of the deal will be
able to take effect, leaving the rest of the deal to be ratified and
implemented by each of the twenty-eight member states’ national legislatures.
The deal purports to remove 98% of tariffs between Canada
and the EU, and officials hope it will generate a €10.9 billion ($14.3 billion
Canadian) increase in trade worth. Further, EU exporters are estimated to save €500
million in duties annually, and there will be mutual recognition in regulated
professions such as architecture, accounting, and engineering and easier
transfers of company staff and other professionals between the EU and Canada.
The European Commission also hopes CETA will create a more level playing field
between Canada and the EU on intellectual property rights and strengthen the
protection and enforcement of copyrights. “Canadians and Europeans share the
understanding that in order for real and meaningful economic growth, we need to
create more good, well-paying jobs for our citizens. Progressive trade
agreements like the one signed today, will do just that,” Trudeau said, shortly after
signing the landmark deal.
European Commission President Jean-Claude Juncker referred to a “new
chapter” in relations between Canada and the EU, hoping this deal will open new
opportunities for the millions of workers seeking them on both sides of the
Atlantic.
The seven years of negotiations between each of the EU
member states and Canada were left hanging in the balance as Wallonia,
Belgium’s southern French speaking region with a population of 3.6 million
people voted to
veto the agreement just a few days before the deal was due to be signed. Because
all twenty-eight EU states had to agree on the deal before it Trudeau could
sign it, Belgium’s veto almost pushed back the long-awaited deal yet again. Belgium
was the lone holdout to signing the deal because its
regions can veto international treaties. The protestors were fearful of an
investor-state dispute mechanism provision and sought safeguards for labor,
environmental and consumer standards, and more protection for Walloon farmers
who believe they will face increased competition from Canadian imports. In
order for the deal to move forward, a last minute addendum was added addressing
the regional concerns.
Further criticisms of the deal include that
it will weaken European consumer rights protections, including those concerning food
safety, and that tariffs are already low and do not need lowering. The deal has
also been criticized as being beneficial only to big business and multinational
corporations while risking net-losses, unemployment, and environmental damage
that might impact individual citizens. These criticisms seem to highlight how
hard it is to get free trade agreements done in a multifaceted and
multicultural economy such as the EU’s. CETA also brought up a lot of talk in
Brussels regarding finding a new consensus on trade. Whatever this consensus
is, it will be very relevant to how the EU approaches Brexit negotiations.
A Potential Model for Post-Brexit Relations with the UK?
Many of the British leaders who advocated a leave vote
during the Brexit campaign pointed to Norway and Switzerland’s relationship
with the EU as a model to aspire to. However, the CETA model may be
significantly more appealing. Norway and Switzerland’s access to the European
Union single market comes at a steep price. Both countries sign up for most EU
regulations, accept the free movement of EU workers, and make payments into the
EU budget. CETA seemingly will give Canada access to the EU single market
without the obligations faced by Norway and Switzerland. However, some Brexit
proponents still have apprehensions about using CETA as a viable model for a
trade deal with the EU.
CETA’s removal of tariffs does not include some sensitive
food items such as eggs and chicken. Further, the EU will still require Canada
to comply with its rules of origin, which oblige non-EU states to undergo
rigorous customs checks. Because of these customs requirements, Canadian
exporters are expected to face extra costs in order to prove their goods are
“made in Canada.”
Finally, the service
industry, which makes up about 80% of the United Kingdom’s economy are only
partially covered by CETA. Thus, although CETA could be a good starting model
for discussions with the EU, it is expected that a trade deal between the UK
and the EU would have to be significantly more comprehensive in order to deal
with the intricate web of ties that currently link the UK and the EU.
How CETA Will Affect the Legal Landscape of
Investor-State Disputes
A lot of debate
has revolved around an investor-state dispute settlement mechanism included in
the deal through which a permanent arbitration tribunal is to be established.
This tribunal, which will settle disputes between companies and governments, has
been controversial, with many protestors claiming it gives too much power to
big multinationals at the expense of consumers and workers. Amongst other
criticisms, critics allege that the investor-state dispute settlement
provisions will allow U.S. companies to engage EU states in arbitration through
Canadian subsidiaries.
Section 4
of CETA provides investment protection to foreign investors and guarantees a
“fair and equitable treatment and full protection and security.” CETA will
allow foreign corporations to sue states before arbitral tribunals if they
claim to have suffered losses because a state violated its Non Discriminatory
Treatment obligations (which can be found in section 3 of CETA) or because of a
violation of the guaranteed investment protection.
Such investor-state arbitrations are not necessarily new
under public international law, but for transatlantic trade and investment, the
comprehensiveness of this parallel model of justice is new. In addressing fears
of confidentiality of arbitral proceedings, CETA provides transparency by
adopting the UNCITRAL Rules on Transparency in Treaty-based Investor-State
Arbitration.
The tribunal will consist of fifteen members named by Canada
and the EU, dealing with individual cases in panels of three, and an appeals
mechanism will be established to ensure “legal correctness” of the awards. Further,
the tribunal’s members will not be allowed to appear as experts or party
counsel in other investor-state disputes.
These investor tribunals
are not a guaranteed part of CETA, and each national legislature will
have to ratify them individually. For example, Belgium’s opposition to the
court suggests that it might never be enacted there, meaning Canadian companies
will not be able to use the arbitration tribunal to sue Belgium over policies
that negatively affect their investments. This could serve as a model for other
countries that worry this provision unduly gives too much power to
corporations.
Moving Forward
Supporters
of the deal say that it will create more than one million jobs, with the
European Commission saying the deal will be worth €545 to each European citizen
every year. Opponents
are angry that CETA meetings were held in secret and fear that the deal has
given too much power to corporations by making it easier for them to sue
governments. However, only time will tell if this deal will boost the stagnant
economies of these two global markets and serve as a viable model for the
future of EU trade deals.
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