The Wallonian mouse that roared

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Carnival of Binche, 2012. [Sylvain Lecocq / Flickr]

The relief that accompanied the 11th hour agreement between Wallonia and Europe on the EU-Canada trade deal shows little has been learned from the ongoing debate over the “winners and losers of globalisation”, writes Steven Hill.

Steven Hill is a journalist and the Holtzbrinck Fellow at the American Academy in Berlin. His most recent book is Raw Deal: How the ‘ Uber Economy’ and Runaway Capitalism Are Screwing American Workers

On Sunday the European Union and Canada finally signed the Comprehensive Economic and Trade Agreement, or CETA, following an 11th hour resolution between Wallonia and the European Union. The pressure on tiny Wallonia and its politicians was immense, as it was being blamed for making the EU a laughingstock before its Canadian partners and the world, and scuppering a trade agreement that was seven years in the making.

But that interpretation was overly simplistic and revealed how little has been learned from the ongoing debate over the “winners and losers of globalisation”. Wallonia’s lonely stand raised important themes about national sovereignty, as well as the personal insecurity that many people feel today amidst the immense tidal wave of the global economy. So many sectors of the public have lost their trust and faith in political leaders, so those leaders need to go the extra kilometer to soothe public anxieties. CETA would have been perfectly fine 10 years ago – but today? Not nearly enough.

It’s interesting that the EU gets tagged from both directions – the UK’s isolationists see the EU as a left-wing plot to strangle them with regulations and immigrants; others in Europe see the EU as a right-wing plot to impose US-style wild west capitalism on them. Neither view is entirely accurate, but the fact that both contradictory views can exist simultaneously is a result of the lack of trust. That’s what both views have in common.

In an era in which $20 trillion in corporate profits is stashed in overseas tax havens, robbing the public treasuries of governments around the world, a treaty for “free trade” can easily look like another type of deregulation that is going to allow corporations to get away with even more than they already do. In an era in which the European Commission has charged that Apple owes €13 billion in back taxes, which is nearly the size of the economies of Iceland and Cyprus and means it paid a corporate income tax of about 0.005%, it’s understandable why sizable sectors of the public feel that the system is rigged.

Given that, I’m puzzled that the designers of CETA and other free trade agreements (like the proposed Transatlantic Trade and Investment Partnership, or TTIP, between the EU and US) don’t seem to comprehend how little credibility they have. For example, giving multinational corporations the legal ability to sue sovereign governments – the so-called Investor-State Dispute Settlement (ISDS) – in near-secret tribunals not only raises suspicions but seems hopelessly outdated. It’s a leftover from the free trade agreements of the 1990s, such as the discredited North American Free Trade Agreement (NAFTA). In today’s climate, including such provisions is a poison pill for any trade agreement.

ISDS lawsuits are used by corporations, both domestic and foreign, to sue sovereign governments that have passed laws that these businesses claim infringe on their “rights.”  After the Fukushima nuclear disaster in 2011, Germany’s government decided to gradually phase out its nuclear power plants and redouble its efforts toward developing renewable energy. Vattenfall, a Swedish utility company that was operating two nuclear plants in Germany, sued for €3.7 billion in compensation through an ISDS provision. This claim is still in arbitration, just one of a growing number of such cases, according to The Economist.

In Canada, after the Quebec government filed a moratorium on hydraulic fracturing for natural gas, Canadian energy company Lone Pine relocated its headquarters to the United States to sue its home country through NAFTA’s ISDS provision. The United States and Canada originally had pushed for the ISDS as a safeguard for US and Canadian business investments in politically unstable Mexico. But what a bitter pill, because now the Canadian government has been sued numerous times by corporations through NAFTA, and has lost seven out of twenty cases, costing them at least $158 million paid to US companies. One of the higher ISDS awards so far has been a $2.3 billion settlement awarded to the oil company Occidental for its claim against the government of Ecuador over its termination of an oil concession contract.

Corporate ISDS attacks feed into a public fear that the biggest corporations are themselves becoming sovereign creatures that are unaccountable. To their credit, the political leaders of Wallonia stubbornly insisted on more assurance that CETA was not going to be another misstep down the path of unraveling the sovereignty of democratically-elected governments.  Sure, one can argue that Wallonia’s fears were overblown, and there’s probably a degree of truth to that. But the point is, it’s hard to know what kind of laws or politicians to trust in the current climate. Witness Donald Trump.

It seems like the experts needs to write a template for a “new free trade agreement,” one that is better geared for today and not 10 years ago. Such an updated FTA would be able to win popular support because it would include appropriate regulatory safeguards, as well as the right values that project a global vision of what trade in the 21st century ought to look like. Such a new trade agreement should include rules for how to regulate overseas tax havens, and how to ensure that powerful corporations can’t run rampant across the globe, cherry picking the regulations that enhance their profits and undermine our societies.

If the trade negotiators put half as much effort into crafting rules to crack down on overseas tax havens as they put into so-called “free trade”, it would have a beneficial effect on the things that matter. Somehow the negotiators always seem to be keenly focused on lifting barriers on companies, but today that needs to be balanced with a “corporate code of ethics” and crackdowns on various corrupt business practices. How can political leaders expect to do one and not the other, and still retain trust?

I’m glad that cooler heads prevailed and that an agreement was stitched together to move forward. Too much was at stake to leave the whole treaty drowning in a quicksand of transatlantic suspicion and paralysis. But this is just the first round of parliamentary approvals, with more rounds to come from all the member states – including the regions of Belgium – before final approval can be signed and sealed.

Once again, Europe’s political leaders have been forewarned: governments that do not safeguard their national interests against continued overreach by multinational corporations may soon find themselves under siege by their own populations, led by populist demagogues. The real battle is over what kind of globalisation will prevail, and how to cope with its turbulent centrifugal forces that pull at society’s seams. Wallonia deserves credit for shining a glaring spotlight where it was needed.

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