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No Easy Answer for Trudeau in Working to “Implement” CETA

Posted December 11, 2015

In Justin Trudeau’s initial “mandate letter” to International Trade minister Chrystia Freeland last month, the newly elected prime minister indicated that one of her department’s “top priorities” was to: “Develop strategies to implement the Canada-European Union Comprehensive Economic and Trade Agreement (CETA).”

However, primarily owing to the heated controversy in Europe surrounding the Transatlantic Trade and Investment Partnership (TTIP) negotiations with the United States and widespread public opposition to a number of its provisions such as the vexatious investor-state dispute settlement (ISDS) mechanism, which CETA also includes in substantially the same format, the task of bringing the deal to fruition will be a challenging one.  

For starters, despite being “finalized” well over a year ago, Canadian and European bureaucrats are still diligently working through the legal review and translation of the agreement’s text, according to spokespeople for Canada’s foreign ministry, the European Commission and the EU delegation to Canada. It remains unclear how much longer this exhaustive “legal scrubbing” will take before the deal can proceed towards ratification; a process that itself is presently somewhat in doubt.   

While the European Commission maintains that international free trade deals such as TTIP and CETA are what is deemed an “EU-only agreement” involving Member States solely via the European Council and therefore only require an approval from the European Parliament, this view of ratification is not universally shared. 

Opponents of the deals contend they constitute a different sort of pact, referred to in EU parlance as a “mixed agreement” – applicable when a treaty contains issues or themes for which the EU has no “competence” – and as such, would also have to be individually ratified by all the parliaments of EU Member States. Although the European Commission has categorically dismissed this argument (notwithstanding Commissioner Cecilia Malmström admitting that both trade deals are “very likely” mixed agreements), that decision is currently being challenged in the European Court of Justice.

Either way, approval of CETA in the current political environment remains highly uncertain, unless as some have proposed, the deal’s contentious ISDS provision is renegotiated. In an effort to appease critics and win back public support for TTIP, Commissioner Malmström several months ago proposed reforming the entire dispute settlement system by transforming it into an international trade court with independent judges, more transparency and an appeal mechanism.

It is currently unknown whether the Trudeau government, unlike its predecessor, would be open to this compromise. Not that making concessions in this regard would necessarily provide a solution guaranteeing support, as described by Peter Mazereeuw in a recent Embassy article:

The Council of Canadians would oppose such a move, as it would still create a system akin to “public insurance for large corporations,” said Ms. Dey.

The Canadian Chamber of Commerce likely wouldn’t support such a move either, said Cam Vidler, the chamber’s director of international policy. Canadian business won’t want to be a “guinea pig” for an untested investor-state arbitration system, he said. 

Canada should push the EU to implement the deal as is, and if that isn’t possible, cut out investor-state arbitration entirely and move forward with the parts of the deal both parties can agree to, he said. 

Canada and the EU could revisit investor-state arbitration at a later date, likely once the EU and US agree on a model for it in their trade agreement, he said.

But that third option may not be as easy as it seems, said Mr. Langrish.

The European Commission will be wary of finishing a free trade agreement without an investment chapter. That could set a precedent for future negotiations, and undermine the commission’s negotiating authority within Europe. 

While getting CETA across the finish line certainly won’t be easy by any measure, at least almost all of the heavy-lifting in terms of negotiating specific details of the agreement has already been accomplished. Much of the struggle remaining will largely be political in nature – and that is something the new government has, so far anyway, shown itself to be fairly adept at.