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Would CETA limit regulatory controls on soft drinks?

Would the “investment protection” provisions in the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) or the United States-EU Transatlantic Trade and Investment Partnership (TTIP) mean US soft drink companies like Coca-Cola and Pepsi could challenge government regulations that limit the sale of their drinks for health reasons?

In 2006, EurActiv reported, “As a response to concerns over children’s consumption of ‘unhealthy foods’, Latvia will ban their sale in schools later this year. The Latvian government voted on 23 August 2006 to ban the sale in kindergartens and schools of food, drinks and snacks containing artificial additives such as colouring and flavouring agents, preservatives, amino-acids and caffeine. The country’s health ministry is concerned about the health implications of children’s regular consumption of food with artificial additives. …The prohibited products will be replaced with ‘healthy alternatives’ such as … unsweetened fruit juice, … mineral water and milk.”

The article highlights, “[The health ministry underlined] that EU member states have the right to ban or restrict the sale of food and beverages containing certain artificial agents.”

But just a few months earlier, in May 2006, the New York Times reported, “The country’s top three soft-drink companies announced that beginning this fall they would start removing sweetened drinks like Coke, Pepsi and iced teas from school cafeterias and vending machines in response to the growing threat of lawsuits and state legislation. The agreement, which includes parochial and private schools contracts, is voluntary, and the beverage industry said its school sales would not be affected because it expected to replace sugary drinks with other ones [such as juice drinks, sports drinks and diet sodas].”

The Latvian measure also predated the bilateral investment agreements with the United States (that came into force in Dec. 1996) and with Canada (Nov. 2011).

What has been the experience elsewhere?

In 2002, Mexico implemented a 20 per cent tax on soft drinks that used a sweetener other than cane sugar, such as high fructose corn syrup (HFCS).

The United States challenged this at the World Trade Organization. They argued, “In Mexico, cane sugar is almost exclusively a domestic product, whereas before the tax, HFCS accounted for 99 percent of Mexico’s sweetener imports. Thus, by taxing soft drinks and syrups made with HFCS, but not those made with cane sugar, Mexico imposed a tax designed to discriminate against imports.” After the US won their challenge, they stated, “The WTO has now confirmed that Mexico’s beverage tax and reporting requirements discriminate against U.S. imports of HFCS, and that this discrimination is not justified under WTO rules nor does the NAFTA provide Mexico a justification to discriminate against U.S. exports.”

But, for context, National Public Radio has reported, “American companies are sending Mexico the ingredients to make foods like high-fructose corn syrup; HFCS exports to Mexico are now 863 times what they were before NAFTA. And all of that ends upon the shelves of supermarkets, whose business model relies heavily on processed food. Walmart, which opened its first Mexican store in 1991, four years after it began selling groceries, now operates 2,114 stores that offer food in Mexico. …As the Institute for Agriculture and Trade Policy, a Minnesota-based think tank, has shown, Mexico’s recent spike in obesity and soda consumption correlates with the passage of NAFTA.”

In 2012, then-New York City mayor Michael R. Bloomberg proposed to limit the sales of sugary drinks larger than 16 ounces.

The American soft drink industry opposed this. The New York Times reported, “[The proposal] prompted panic among powerful beverage companies, who feared that their products could be widely branded as a threat to public health. …The soft-drink industry, through lobbying and public-relations campaigns, has helped defeat soda taxes and other regulatory measures in states and municipalities around the country. After Mr. Bloomberg announced his plan in May 2012, the industry poured millions of dollars into an ad campaign that framed the proposal as infringing on consumer freedom. The industry later retained the law firm of Latham & Watkins to challenge the limits in court.”

In 2014, the New York State Court of Appeals ruled that the New York City Board of Health had “exceeded the scope of its regulatory authority” when it enacted this proposal.

Article 8.9 (1) of CETA says, “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.” But that’s tricky language in that it presumes a pre-existing right to regulate.

For Members of the European Parliament who support regulatory controls on soft drinks, we suggest they probe more deeply into the possible application of trade disciplines that would prevent such measures.