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10/12/2016

Paris and Berlin call for review of EU-Canada trade deal

Trade & Society

Paris and Berlin call for review of EU-Canada trade deal

The Canadian parliament in Ottawa.

[Vince Alongi/Flickr]

Trade negotiations between the EU and Canada concluded in October 2013, but France and Germany now want to make changes to the CETA agreement’s investor-state dispute settlement (ISDS) clause. EurActiv France reports

While the free trade agreement between the EU and the US is still under negotiation, the deal between the EU and Canada is, at least in theory, all but wrapped up.

But French and German ministers now want to review the content of the Canadian agreement, in order to remove any potential difficulties from its dispute settlement mechanism, the ISDS clause. The clause is designed to protect investments by allowing recourse to arbitration tribunals in the case of conflicts between private companies and states.

The French Secretary of State for Foreign Trade, Matthias Fekl, travelled to Berlin on 21 January to discuss the issue with the German Minister for the Economy Sigmar Gabriel, and the State Secretary at the German Federal Ministry for Economic Affairs Matthias Machnig.

Joint declaration

In a joint declaration, the ministers of the EU’s two largest economies asked the European Commission, which steers trade negotiations on behalf of the 28 EU member states, to examine “all the options for modifying” the ISDS clause in the agreement with Canada.

This request from Paris and Berlin comes after the Commission published the results of a public consultation over the inclusion of the ISDS in the EU-US trade deal currently under negotiation, the Transatlantic Trade and Investment Partnership (TTIP). An overwhelming majority of the 150,000 responses opposed the mechanism. 

Yannick Jadot, the TTIP spokesman for the Green Party in the European Parliament, said the declaration did not go far enough. “The member states need to understand that the European citizens do not just want the arbitration clause to be adjusted, but for the whole mechanism to be abolished,” he said.

If French and German opposition to the arbitration clause is nothing new, France and Germany are breaking new ground in asking for the negotiations with Canada to be reopened.

A source in the French Ministry of Foreign Affairs welcomed the development. He said, “What is important is that the Germans are for the first time accepting the link between the arbitration clauses in CETA and TTIP”.

>> Read: Germany threatens to reject EU-Canada free trade deal

Negotiations on the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada began in May 2009. They were concluded in October 2013. The ratification will begin in the first semester of 2015.

This next hurdle may prove difficult for the CETA agreement. Yannick Jadot said, “The Commission considers the negotiations to be finished, but the member states could very well say they are not satisfied”.

Though it comes at a later stage in the process, the debate over arbitration in CETA is closely linked to that of TTIP. If the principle of arbitration tribunals is accepted in one agreement, it sets a precedent.

>> Read: France and Germany to form united front against ISDS

“The big American countries all have Canadian branches. If we install the arbitration mechanism in one large, developed country, it will become the standard,” Yannick Jadot warned.

>> Read: ISDS decision delayed to end of TTIP talks

Canadians against change

For the Canadians, the dispute settlement clause appears non-negotiable. “Canada and the EU have negotiated an ambitious, balanced and beneficial agreement for both parties, which includes the ISDS, and we will continue our efforts to implement CETA as soon as possible,” a Canadian government spokesperson told EurActiv.

The European Commission has yet to respond to the French and German calls for renegotiation, but any backpedalling over CETA could weaken their negotiating position for TTIP.

Opposition to CETA in the European Parliament is strong, and the majority needed to ratify it is by no means guaranteed. Earlier this month, Matthias Fekl said, “The majority in France and Germany is not in favour of ratifying the arbitration clause in CETA as it stands”.

The current objective is to come up with proposals to reform the arbitration clause and reopen the debate during the first semester of 2015. 

Background

Ottawa and Brussels started trade negotiations in 2009 and a deal was initially supposed to be concluded by the end of 2011.

That deadline was pushed back to the end of 2012 as the two sides tried to resolve differences over how much beef Canada can export and how much freedom EU companies will have to bid for Canadian government contracts.

The talks stalled again in 2013 over demands for protecting Europe's distinctive geographically defined products such as feta and gorgonzola cheeses.

Backed strongly by Canadian and European industry, the deal was originally presented as a straightforward way to reinvigorate economic growth for both sides and generate around $28 billion in new trade and business a year.

Negotiations between the US and the EU on the Transatlantic Trade and Investment Partnership (TTIP) began in July 2013.

If the treaty is signed, it will affect almost 40% of world GDP. The transatlantic market is already the most important in the world. It is estimated that TTIP could save the average European household €545 each year, and could cause the European Union's GDP to grow by 0.5%.

Investor-state dispute settlement clauses, increasingly part of free trade agreements, allow companies to take governments to international arbitration tribunals.

Timeline

  • 2015: EU-Canada free trade agreement expected to be ratified across the 28 EU member states

Further Reading