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A trade deal that sets a bad precedent: Trade Justice Network warns of CETA risks to Europe

The following op-ed by the Trade Justice Network appears in this week’s edition of European Voice, a weekly news source providing “a comprehensive account of the activities of the key European Union institutions — the European Commission, European Parliament and Council of Ministers,” according to the website.

A trade deal that sets a bad precedent
The draft trade deal with Canada would threaten European policy and interests.

European Voice, July 26, 2012

The European Union and Canada have been negotiating a comprehensive economic and trade agreement (CETA) for more than three years, and in that time the talks have barely been a blip on the news radar.

How quickly things change. In early July, a Canadian law professor wrote that the draft CETA reproduced word for word many of the provisions in the Anti-Counterfeiting Trade Agreement (ACTA), which an army of internet activists have convinced politicians across Europe undermines privacy and innovation.

Almost overnight, a once-sleepy Twitter hashtag (#CETA) became clogged with warnings about how the European Commission was using its Canadian trade deal to bring ACTA into force through the back door.

This explosion of interest in the CETA negotiations is welcome: a bilateral trade and investment deal in secret is no place to make unpopular changes to copyright laws. But we hope that the controversy leads to other questions about how CETA would hurt Europe.

For example, CETA is one of three trade deals in which the Commission is hoping to include comprehensive investment provisions allowing foreign firms to sue European governments for public policies that purportedly breach corporate rights.

In one such investor-rights suit in north America, Canada’s federal government was ordered to compensate a US firm, S.D. Meyers, when a ban on exporting toxic PCB waste to the United States disrupted its profits. The exports were illegal in the US and the ban was required under Canada’s treaty obligations related to trade in toxic substances. None of that mattered: the primary consideration under investment treaties is whether the vaguely worded right-to-profit of the investor has been upset.

Germany has since been the victim of two investor-state disputes, both brought by the Swedish energy firm Vattenfall under the investment provisions of the European Energy Charter Treaty. In the first case, Germany settled with Vattenfall for an undisclosed amount over the impact of environmental policies on the company’s coal-fired power plant on the River Elbe. Then in May, Vattenfall launched a second case against a German decision to phase out nuclear power. In this case, it wants €700 million in compensation for the closure of nuclear plants in Krümmel and Brunsbüttel.

Until the Lisbon treaty, investment was the exclusive competence of member states. CETA will be the first EU-wide investor-rights treaty covering all member states.

What difference would a new treaty with Canada make? It is important to keep in mind the deep integration of the north American economy. The same US firms that have taken Canada before investor-state panels under the North American free-trade agreement (NAFTA) 17 times will be able to challenge EU policy through their Canadian investments.

Canada is, of course, home to numerous oil companies active in the controversial oil sands of Alberta. Do Europeans really want to risk suits from Canadian-based companies against European environmental and climate-change policies?

Another part of the CETA that should be getting more attention is the chapter on cross-border trade in services. The CETA is the first instance of the European Commission using a so-called ‘negative list approach’ for services, meaning that if a member state does not list a service sector for protection, it is automatically covered by the CETA investment and services rules. The positive list approach provides much more certainty for member states. (Moreover, all services created in the future would be subject to trade liberalisation disciplines.)

The Canadian government will probably use this week’s round of negotiations to pressure the Commission not to protect public services such as water, electricity, healthcare and postal services. If the Commission bends to that pressure, the deal would, for example, significantly constrain the growing trend in Europe toward the re-municipalisation of formerly privatised water systems.

These are some of the many dangers that lurk in ‘next generation’ trade agreements such as CETA. The ACTA-related clause is not the only provision that should complicate efforts to conclude the CETA this year.

Stuart Trew and Blair Redlin are members of the Trade Justice Network, which represents a broad spectrum of Canadian civil-society organisations.