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Canada as Trojan Horse

Canada as Trojan Horse
Photo Credit: Jakob Huber

BERLIN – “It ain’t over till it’s over.” That’s the approach taken by German opponents of the Comprehensive Economic Trade Agreement (CETA) between Canada and the European Union following its recent reworking to include a revised investment chapter.

“The game is not over,” said Katharina Droege, a Green Party member of the German Parliament, who vows to continue the fight against CETA and in particular the section on investor–state dispute settlement (ISDS)

But the battle to stop CETA, led by left-of-centre political parties like the Greens, anti-globalization NGOs, and trade unions, particularly in Germany, seems unlikely to succeed, particularly after these latest changes, which may be enough to assuage the sharpest concerns of some doubters.

In late February, Canada and the EU announced that they had finalized the “legal scrubbing” of the deal between the 28-nation European Union and Canada and that the final text will soon be published. That should take place by May or June, said a senior German trade official, who declined to be named and is optimistic the deal will now go through. A meeting of the Council of the European Union is expected to vote on CETA on May 13.

Yet the path to ratification in Europe could still face some obstacles. Because of its complex nature, CETA may end up being defined as a “mixed” agreement that impacts national competences of member countries as well as the Union as a whole. If that’s the case, the agreement must be approved by every one of the EU’s 28 national Parliaments as well as the European Parliament and the European Council, which will lengthen the process.

But officials said even if national Parliaments each must give their approval, it shouldn’t be a deal breaker. CETA can enter into force on a preliminary basis while the votes take place, putting 95% of the deal into effect. EU trade deals have never been rejected before; if a small country has second thoughts, it can be given an opt-out, and the agreement as a whole can proceed.

CETA has gotten a surprising amount of attention in Europe, but Canadians shouldn’t delude themselves. Forget Justin Trudeau’s love affair with the international media. Canada still isn’t that important globally and few Europeans care about better access to the Canadian market. The German trade official says Canada represents no more than 0.8–0.9% of German exports: “It’s a medium sized market. It’s okay, but it’s not a big deal.”

“Initially [2010], there was no interest in CETA from the public here,” the German official said. “There was never any discussion of it.” But what soon became a big deal is the Transatlantic Trade and Investment Partnership (TTIP), currently under negotiation between the U.S. and Europe. For Germany, it’s “yuge,” as Donald Trump would say. Americans account for 9.5% of German exports, 10 times the Canadian total.

And what worries free trade skeptics here like the Greens, NGOs, and trade unions is that whatever is included in CETA, particularly regarding investment, has a good chance of being cloned in TTIP, the deal with the Americans. “Canada is perceived as the Trojan horse for the US” by opponents.

“We believe that CETA is the blueprint for TTIP,” said Lena Blanken, a campaigner for Food Watch, a German-based consumer rights group adamantly opposed to both deals. “We see [CETA] as a threat to our democracy. We say that we have to stop CETA so it can be harder to get TTIP through.”

The Greens’ Droege expresses the same view: “If we lose the game with CETA, it’s lost for TTIP too. That’s why it’s important to exclude ISDS from CETA.”

The investment chapter is controversial because it allows foreign investors to sue national governments for threatening their investments through domestic policy and legislation. Opponents say it can be used as a cudgel by multinationals to stop countries from protecting the environment or public health, citing efforts by Vattenfall, a Swedish-based electric utility, to sue the German government for its decision to phase out nuclear power and the attempt by Philip Morris, the US tobacco firm, to stop Australia from adopting plain-packaging for cigarettes. Both companies used investment protection treaties in their efforts to stop national governments from acting.

Canada and the EU say they have responded to criticism of the investment protection chapter in CETA by reforming the arbitration process, setting up an investment court, and reducing the influence of high-paid corporate lawyers. These lawyers currently play a lucrative game of musical chairs, alternatively acting as counsel on behalf of companies, arbitrators, and expert witnesses. In future, the tribunals are supposed to act like courts with the arbitrators chosen from a list of retired judges, academics, and other trade experts instead. There will be a new appeal process and increased transparency when it comes to hearings and documents.

Supporters of CETA like the BDI, the Federation of German Industries, are cautiously optimistic that the proposed changes to CETA, particularly investor protection, will be sufficient to accommodate most critics of the agreement and allow it to proceed to implementation.

“I now expect it to be less controversial,” said Fabian Wendenburg of the BDI, who praised CETA on several grounds, including increased market access for European firms by extending procurement provisions to include Canadian provinces.

Even the most fervent anti-CETA lobbyists have been forced to accept that the changes to the investment chapter may be enough to convince recalcitrant members of Germany’s Social Democratic Party to back the agreement. Blanken, the Food Watch campaigner, says that Sigmar Gabriel, the Social Democratic Leader and Economy Minister in the Merkel-led coalition government, is working hard to get the deal through, even with party members who earlier opposed it. “We fear that the Social Democrats will not, in the end, vote against CETA,” Blanken said.

So despite the rise of forces battling free trade in the US, and fears that the EU itself could be threatened by Britain’s June vote on an exit from the Union, it seems that Canada’s free trade deal will survive and actually be ratified, even if it takes a while.

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