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CETA text leaked prompting numerous concerns about its implications

Toronto Star

Photo: The Council of Canadians opposes CETA on the front-page of the Toronto Star, the country’s largest circulation newspaper

On August 13, German public television station ARD’s program ‘Tagesschau’ (the ‘Daily Show’) leaked the first 521 pages of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). The next day, they released the remaining 1,000 pages of annexes and reservations in the text.

These leaks came just a week after the Harper government announced that negotiations on the deal had been concluded. The text is scheduled to be signed by the Harper government and the European Commission on September 25 in Ottawa. After that ceremony, it faces a ratification process that could take up to two years.

Release the text!

No date has been set yet for the text to be officially released, though some media reports have suggested it will be released at the time of the signing (while other reports say that isn’t the case). 

The Harper government has refused to confirm that the text released by German media is the final draft of the deal or to comment on its content, with a spokesperson for the trade minister saying, “Canada does not comment on leaks of purported negotiating texts.”

The Council of Canadians has long called for the text to be released – a call now being amplified by numerous others.

Queen’s University Belfast professor Mohsen al Attar McGill and University BCL/LLB student Lucas Versteegh write in the National Post, “Of course, negotiating agreements is not a casual affair, and the temporary use of secrecy is often a valid strategy. We note, however, that not everyone is kept in the dark: industry leaders were apprised of the negotiations throughout the process, and many even counselled the negotiating team on their preferred outcome. Included on this VIP list are Canada Pork International, the Chamber of Commerce, SNC-Lavalin and other agricultural, financial, and service industry groups.”

Even the Globe and Mail editorial board has called for the Harper government to officially release the text. They say, “For months, there has been talk about “legal scrubbing” and translations into the many languages of Europe. But Canada has only two official languages. And the finer points of legal draftsmanship are not of primary concern to the Canadian electorate. …The federal government should instead make the current text of the deal public, as soon as possible. The treaty should not be debated in a mad rush.”

That said, the text leaked by ARD is widely acknowledged as the final draft of the deal that will be signed in a few weeks time and it has raised numerous concerns. It will take some time to read through the 1,521 page agreement and develop a substantive critique of it. As I commented in the Toronto Star, “[The leak] is really a first chance for the public to be able to scrutinize the deal the way we should have been given the right to do months or years ago.” Nevertheless, here are some initial cursory observations:

Investor-state (pages 472-497)

Basically, investor-state dispute settlement provisions allow corporations to sue a government before a special tribunal rather than within the regular court system. In Canada and Europe, where the judicial systems are mature and certainly capable of handling such legal conflicts there can be no good reason to opt for a ‘kangaroo court’ mechanism.

In a Huffington Post article, I commented, “It’s the same provision that we’ve seen in NAFTA that has been so disastrous.”

Al Attar and Versteegh write, “Investor-state dispute provisions not only exclude the judiciary, but they also result in massive litigation, especially for Canada. Under NAFTA alone, successful suits against Canada have resulted in payouts worth $157-million, and the repeal of one law. Of greater concern are the nine ongoing cases claiming $2.5-billion in damages.”

Financial services (pages 254-283)

We know from media reports that this was a thorny issue right up to the conclusion of the deal. The Harper government reportedly wanted a broad exemption for the financial sector from the deal, including an exemption for private investors and financial institutions from investor-state challenges.

But the leaked CETA text indicates no exemption for financial services (meaning the current foreign ownership caps on financial services, including banks, will be prohibited) and that financial services will be subject to investor-state for the first time. The caveat in terms of investor-state challenges is that a special committee of financial experts will be established to decide if a government action in this area (for example, to stabilize the economy) was a ‘prudential measure’ and therefore acceptable. That said, it’s also clear that sub-sectors, such as banking, cannot be protected on the basis of a prudential measure. And while the dispute panel would be specially chosen from a grouping of financial experts, the basic dynamics of the investor-state process remain in place.

As such, it would appear that the Harper government caved on this critical issue (of concern even to them) in order to get their deal done.

Procurement (pages 310-340)

Canadian Centre for Policy Alternatives researcher Scott Sinclair has commented that the procurement provisions are “the most extensive set of commitments that Canada has ever made. It will interfere with, and potentially end, the use of procurement as an economic development policy tool and interfere with municipal governments, universities or hospitals who, for example, want to implement buy-local food purchasing policies.”

Les Whittington of the Toronto Star reports, “The deal will require Ontario government ministries and provincial agencies to open up bidding to businesses from EU countries on goods and services contracts worth approximately $300,000 or more. For construction contracts, which tend to be larger, the threshold will be about $7.9 million (the exact thresholds will be based on the value of foreign exchange reserve assets defined by the International Monetary Fund). …The same $300,000 threshold for opening up bidding to European firms will apply to Ontario’s municipal governments, with the exception of municipal energy undertakings, and to school boards, publicly funded academic institutions, hospitals and social service agencies.”

“Overall, the use of buy-local strategies by Ontario authorities hoping to boost their economies will be curtailed, the CETA text shows. For instance, the agreement will make it harder for governments to require bidders to source parts or labour locally or to extract promises of job-training from bidders.”

We’ve commented that the exemptions sought by numerous municipalities across the country are not respected in this deal. The Huffington Post reports, “Patterson said several municipal governments including Toronto, Victoria, Hamilton and Red Deer asked to be exempted from CETA rules that banned ‘buy local’ policies and other tools to support local jobs and development through public spending.”

Water (page 16)

The text says, “Where a Party permits the commercial use of a specific water source, it shall do so in a manner consistent with the Agreement.”

Andrea Rexer, a German journalist who heads the Frankfurt office of the German newspaper Sueddeutsche Zeitung, comments, “In other words, once a water utility has been privatized by a Canadian government body, it will be hard to make it public again, because then comes into play another highly controversial part of the CETA treaty, investor rights provisions that would drive up settlement costs.”

Council of Canadians executive director Garry Neil notes, “If you privatize a municipal water service, or you create a public-private partnership and then the citizens of that same municipality 10 years on decide… that they want to re-municipalize, then you open yourself up to an investor claim. Or if you give rights to Nestle, because Nestle is a European corporation, you give rights to them to take water from the aquifer and bottle it and sell it back to us. And then suddenly you decide, ‘Wait a minute. There’s something fundamentally wrong with that. We’re running out of water. We’re not going to allow them to do that anymore.’ Suddenly [water] is a good under the agreement because you’re giving that permission and if you change the rules, then they would have a right to sue you.”

Pharmaceutical patents (pages 341-378)

The Toronto Star reports, “The leaked documents confirm Ottawa has agreed to new rules governing pharmaceutical patents that could eventually drive up the cost Canadians pay for prescription drugs by a total of $850 million or more annually.”

The deal in principle signed last October included the stipulations that patents on brand name pharmaceuticals would be extended by two years, beyond, as the Globe and Mail notes, the usual seven-to-nine year window. This would apply to drugs patented after CETA is ratified, so taxpayers can expect to see the impact of these costs in about ten years time.

Last October, Harper pledged, without providing details, to provide compensation for the additional costs of this provision to public drug plans. But already a Canadian Medical Association Journal study published in January 2012 showed that one in ten Canadians (one in nine people in British Columbia) do not fill their drug prescriptions because they cannot afford to.

Implications in relation to TTIP

TTIP is the Transatlantic Trade and Investment Partnership currently being negotiated between the United States and the European Union. While many Europeans were concerned about CETA, the subsequent start of TTIP negotiations has taken those concerns to a heightened level given the size of the US economy.

The investor-state language in the leaked text of CETA is unchanged from previous drafts that have been leaked. That’s significant in part because of the EU consultation that took place in March to review concerns about this provision in TTIP. More than 150,000 comments were submitted on this issue. Kenneth Haar, a spokesman for Corporate Europe Observatory, says, “The Commission is not really serious about its own consultation. It’s more about image than substance. Though they [CETA and TTIP] are two separate agreements, I think those who chose to respond to the Commission’s consultation are being ridiculed.”

And the incoming EU president, Jean Claude-Juncker has stated, “I don’t understand why great democracies would not have faith in the judiciary. We have courts which are able to deal with cases that are brought to them, and so I’m not really in favour of what one could call ‘private courts’ or arbitration bodies which may sometimes reach good decisions but don’t always have to justify their decisions.”

Next steps

The Council of Canadians has been campaigning against CETA since October 2008 and will see this work through to the defeat of this deal in 2016. Among our strategies, we will continue to highlight the investor-state challenges that could be faced by Europe. We will work with our European allies – John Hilary and Susan George among them – who have launched a European Citizens Initiative petition campaign against CETA. And we will continue to take the concerns of Canadians and Europeans to the European Parliament in Brussels and Strasbourg and to the legislatures most likely to veto CETA.