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Canada-EU CETA to be signed, but its ratification and ‘investment protection’ provisions are in doubt

Walloon minister-president Paul Magnette answers questions from media. Photo by Yves Herman/ Reuters.

What can we discern from the news reports on the resolution of the impasse that stopped the signing ceremony yesterday for the Canada-European Union Comprehensive Economic and Trade Agreement (CETA)?

The impasse was led by the Belgian region on Wallonia and its Socialist Party minister-president Paul Magnette.

Earlier this week, the Associated Press reported, “Politicians in Wallonia argue the proposed deal would undermine labour, environment and consumer standards and allow multinationals to crush local companies.” And BNN highlighted, “Walloons have concerns about the threat of surging pork and beef imports from Canada and an independent court system to settle disputes between states and foreign investors, which critics fear hands power to multinationals. Once the core of the Belgian economy, Wallonia has seen coal mines shut and steel jobs disappear and distrusts globalization. Just last month, Caterpillar announced plans to close a plant there, cutting some 2,000 jobs.”

Last April, when the Wallonian parliament first voted against CETA, Magnette stated, “As long as we do not have all the guarantees (of the future dispute settlement body and other red line issues), it will not be possible for us to ratify such a text, and it is not possible to give full powers to the [Belgian] Minister of Foreign Affairs” to sign CETA. Magnette now says, “The amended and corrected CETA is more just than the old CETA. It offers more guarantees and it is what I will defend.”

Our understanding of this situation is as follows:

  • no changes were made to the CETA text

  • the interpretative declarations that have been negotiated would only be referenced if there is ambiguity in the CETA text

  • there will be no provisional application of investment court system (because of the German constitutional court ruling earlier this month, an earlier decision by the Council of the European Union, and the Belgian declaration negotiated this week)

  • the five regions of Belgium have reiterated that they will reject ICS unless there are substantive changes (including judges would have to be selected in a certain way, that it would evolve into a multilateral court, etc)

  • it’s likely that the Bundesrat (that represents the sixteen federal states in Germany at the national level) would also reject ICS in its present form

  • we are relatively confident that, unless CETA is reopened and ICS is renegotiated, that it’s unlikely ICS will ever be enforced (in specific countries or possibly the European Union as a whole)

  • Magnette negotiated in the Belgian declaration that Belgium will ask for an opinion from the European Court of Justice within a year

  • if the European Court of Justice rules that ICS is not compatible with European law, then it cannot move forward (European and German judicial association have already indicated that they don’t think it’s compatible with European law)

  • an understanding of a safeguard agreement was also reached that if a product floods a market, then a tariff could be imposed or some compensation made (over the next year those levels will be determined)

  • at any point during the ratification process, any Belgian region could withdraw their support from CETA (a previous existing right that they reiterated, but it means without that regional support that Belgium couldn’t ratify CETA)

  • at any point any of the 28 member state countries could end provisional application of CETA (the implications are unclear if this would then exclude just that one country or end the deal for all 28 member states)

  • Belgian regional parliaments are likely to approve all this today, the Council of the European Union will approve this by midnight tonight, and that a signing ceremony could happen by Monday or at some point relatively soon

The front-page of The Globe and Mail reports, “A tentative deal has been reached to put [CETA] back on track for approval by European leaders, but negotiations in Belgium have revealed that the most contentious part of the accord – a court where businesses can sue another country’s government – has an uncertain future. Belgium’s opposition to the investor court portion of CETA suggests it might never be enacted there. This could mean Canadian companies could not use it to sue the Belgian government for policies that affect their investments, and Belgian companies would not have this option in Canada. Should other nations take the same position, the provision could end up being enacted on a patchwork basis.”

And Toronto Star columnist Thomas Walkom comments, “The signing can now go ahead [but] Ottawa may want to put the investment court portion of the deal on ice until the EU nations decide which of them will agree to it. The Guardian reports that as part of its deal with Wallonia, Belgium has agreed to ask the European Court of Justice whether the investment court dispute settlement proposal is even legal. It is possible that, in the end, the controversial dispute settlement system will be scrapped entirely. If so, that would remove one of the worst elements of CETA. A similar dispute settlement system in the North American Free Trade Agreement has allowed foreign firms to override domestic environmental laws.”

Overall, while CETA may be signed, the implementation of its most-controversial provision may never happen. That is good news and a major win! And while Prime Minister Justin Trudeau may sign CETA in the coming days or weeks, it still faces a vote in the 751-member European Parliament and a 2-3 year process of ratification in the 38 national and regional parliaments in Europe, where the numerous other flaws in the agreement will be debated and voted on. And so there is hope and good reason to believe that CETA will not survive the many ratification votes to come.

Council of Canadians chairperson Maude Barlow says, “CETA in fact could be as dead as it was yesterday. It also sends the ICS – the provision that allows foreign investors to sue governments – to the European Court of Justice for a ruling on whether it is compatible with EU treaties. Any decision on regulatory cooperation can still be blocked by Belgium’s regions and they can restrict Canadian market access on agricultural products. This has a long, long way to go before it is real, and no amount of ceremony with a formal looking signing by our Prime Minister in Brussels can change this fact.”