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Globe & Mail columnist calls for scrapping ISDS to save CETA

CETA Trojan HorseThe Globe and Mail‘s national business correspondent Barrie McKenna has a solution to getting the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) through the European Parliament – drop the controversial investor-state dispute settlement (ISDS) provision.

In this recently published column, McKenna writes, “The investment chapter, which establishes the right of investors to directly sue governments, has become a major sticking point for the Europeans. It’s not clear that buffing and polishing will fix it. ….Public opinion in Europe has turned against investor rights. Critics worry that lawsuits will be used to undermine national health, social and environmental policies. Without changes to the investor chapter, the European Parliament and perhaps some member countries would almost certainly reject the final deal.”

McKenna is right in this argument:

  • A European petition calling for CETA not to be ratified and for negotiations on the United States-European Union Transatlantic Trade and Investment Partnership (TTIP) to stop has collected more than 3.39 million signatures. That petition states, “We want to prevent TTIP and CETA because they include several critical issues such as investor-state dispute settlement and rules on regulatory cooperation that pose a threat to democracy and the rule of law.”

  • In Aug. 2014, Reuters reported, “EU lawmakers are threatening to block a multi-billion dollar trade pact between Canada and the European Union — a blueprint for a much bigger EU-U.S. deal — because it would allow firms to sue governments if they breach the treaty. …Together with the Socialists’ 191 members, the political groups [in the European Parliament] opposing the agreement could count on 341 votes, just 35 short of a majority.”

  • European Union member states Germany, France, Austria, Hungary, Slovenia, Greece and Belgium have expressed concern about ISDS in CETA. It is also believed that Denmark, the Netherlands, Sweden, Luxembourg, Belgium and Italy have concerns about the ISDS provision.

McKenna highlights, “A little history: Coming into the CETA negotiations, it was Europe that pushed aggressively for a special dispute-settlement system that allows foreign investors to sue governments if they believe they’ve been treated unfairly compared to domestic ones. Canada, on the other hand, with a decade of experience with dispute-settlement under the North American free-trade agreement (NAFTA) was understandably gun-shy. Canada has been sued 35 times – more than either the U.S. or Mexico – while losing a handful of cases. The U.S. has never lost.”

Here McKenna may be off-base given it’s generally believed it was Canada, not the EU, that pushed for the inclusion of ISDS:

  • In Oct. 2013, then-Council of Canadians trade campaigner Stuart Trew wrote, “A sustainability impact assessment of CETA for the European Commission recommended against including an investor-to-state dispute process. The European Parliament would rather CETA included only a state-to-state dispute process.” The European Commission is the EU executive body that negotiated CETA.

  • In May 2015, Maclean’s reported, “Canada asked for the inclusion of ISDS in CETA, wishing to preserve a model that operates under NAFTA. The EU agreed to the investment-protection provisions before the controversy erupted with the U.S.”

  • Even the current Liberal government doesn’t appear “gun-shy” about the provision in its defence of the Trans-Pacific Partnership. Global Affairs Canada says, “Our experience under the NAFTA demonstrates that neither our investment protection rules nor the ISDS mechanism constrain any level of government from regulating in the public interest.”

McKenna concludes that, “CETA has become the battleground for the much larger trade deal with the United States. A wise course for Canada would be to scrap the chapter, and let the Europeans and the U.S. duke it out later. Canada already has investment-protection agreements with some individual EU countries, and in others, credible domestic courts provide ample protection for Canadian investors. Besides, European companies are much more invested in Canada than vice versa. As a net capital importer, Canada is much more likely to be a target of future CETA lawsuits.”

His conclusion is not that dissimilar to the one made in 2014 by the Cato Institute, a libertarian think tank founded by Charles Koch. The director of their trade policy studies centre wrote, “The inclusion of ISDS in trade agreements subverts prospects for trade liberalization. U.S. multinational corporations want access to ISDS, but they don’t need it. If the trade agenda is the proverbial airplane that is down an engine and losing altitude, throwing ISDS out of the cargo hold to lighten the load is the best way to reduce the chance of a crash.”

It remains to be seen what the Trudeau government will do. The prime minister has clearly indicated he wants to see CETA “implemented”, and he recently met with German chancellor Angela Merkel, French president Francois Hollande and the head of the European Parliament to win support for the deal, but at the same time CETA’s chief negotiator has cautioned that Canadian corporations should not be put at a disadvantage relative to American corporations and the rights they might be able to secure in the ongoing TTIP negotiations. As such, despite ongoing efforts to rescue the deal, CETA appears to remain in limbo.

Further reading
Council of Canadians disagrees with Globe and Mail‘s endorsement of CETA, ICS ‘reform’ (Jan. 25, 2016)