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CETA does not ensure a government’s right to regulate

Does the recently amended Canada-European Union Comprehensive Economic and Trade Agreement (CETA) really protect a government’s right to regulate?

On Feb. 29, CBC reported, “The Canadian government is one step closer to ratifying a ‘gold-plated’ trade deal with the European Union, says International Trade Minister Chrystia Freeland. …Freeland announced that some amendments have been made to a controversial investment protection clause which had become a sticking point in negotiations between the two countries. …’There have been some modifications to the investment chapter to reflect the shared intent of Canada and the EU to strengthen our provisions on the right to regulate’, Freeland said.”

But European commentator Ante Wessels writes, “The European Commission published the text of the draft EU-Canada trade agreement (CETA), which includes an investor-to state dispute settlement (ISDS) section. …CETA draft article 8.9 (1), page 47 [says]: ‘For the purpose of this Chapter, the Parties reaffirm their right to regulate within their territories to achieve legitimate policy objectives, such as the protection of public health, safety, the environment or public morals, social or consumer protection or the promotion and protection of cultural diversity.'”

Wessels highlights the clause only “reaffirms” a right to regulate which is presumed to exist but, as is known from Canada’s experience with the North American Free Trade Agreement, does not in reality. For example, S.D. Meyers fought and won a NAFTA investment case against Canada for a temporary ban in the mid 1990s on toxic PCB waste imports from Canada to the United States. This activity was illegal under U.S. law, and Canada was arguably under treaty obligations not to allow PCB exports. Nonetheless, a NAFTA panel found that Canada had violated the national treatment and minimum standards of treatment rights of S.D. Myers, awarding the firm $5 million in compensation.

Wessels also notes that, “According to an Inside U.S. Trade’s World Trade Online article Canada succeeded in ‘changing the language from the EU’s [Transatlantic Trade and Investment Partnership] proposal in a way that sources on both sides of the debate agreed would provide less protection for governments against challenges by investors’.” TTIP says, “The provisions of this section shall not affect the right of the Parties to regulate…” But Wessels notes that formulation still does not “effectively protect against unlimited backward looking damages including expected profits and interests.”

This all provides a worrisome context for Freeland’s comment, “I’m absolutely confident that Canadian investors and Canadian businesses will have their rights fully protected in this agreement”.

Council of Canadians chairperson Maude Barlow has written, “TTIP and CETA impose new limits on the right of governments to regulate on behalf of their people or the environment, establishing obligations that go far beyond the traditional requirement in trade deals not to discriminate between foreign and local corporations. They set restrictions on domestic regulations in services and ‘other economic activity’, including mining, oil and gas, forestry, agriculture and fishing. Because they are ‘top down’ agreements, exemptions to this deregulation agenda must be listed and negotiated.”

She has also noted, “CETA commits to a process whereby any differences in regulations between Europe and Canada, be they labour rights, environmental protection standards, food safety rules or tax laws, could be considered an obstacle to trade and suppressed. Both parties agree to share information of contemplated or proposed future regulations with one another even before they share them with their own elected parliaments in order to ensure they are not trade distorting. That means the other party could make changes to a piece of legislation before it has been seen by its own elected officials or the public.”

The Council of Canadians rejects the Trudeau government’s agreed-upon amendments to the investor-state provision in CETA. Governments must have the right to regulate. Furthermore, CETA’s proposed investment court system still gives a special status to foreign corporations by allowing them to challenge the laws that apply to everyone else through a special system outside established court systems.

The Council of Canadians is campaigning to defeat CETA.