EU quietly asks Canada to rework trade deal's thorny investment clause
Both sides admit surprise as deal risks losing ratification vote thanks to anti-American sentiment
European Union officials quietly approached Justin Trudeau's new government last fall with a request to revisit the controversial investment protection clausein the Canada-EU trade deal.
Negotiations for the Comprehensive Economic Trade Agreement (CETA) were supposed to have concluded in the summer of 2014 theformer Conservative government led by Stephen Harper had trumpetedsuccess since an agreement in principlein 2013.
Butnothing wassigned then. Or since.
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Now, stoked by fears of setting a badprecedentfor trade talkswith the United States,well-organized dissent in Europehas taken hold.
It risks ahumiliating defeat ona ratification vote expectedat theEU'sparliament in Brussels this fall,unless a compromise can be reached to appeasemoderate opponents.
"Both parties don't want to re-open negotiations," said Marie-Anne Coninsx, the EU's ambassador to Canada.
But: "there might be some legal adjustments that would benecessary to the clause and we have indications fromboth sides that there's willingness to do this," she told CBC News.
Negotiators have been meeting weekly byvideo conference, as alegal process to "scrub", or vet,the text and check23 languagetranslationsdrags on. The EU believes this section can be reworked as part of the "scrub."
International Trade Minister Chrystia Freelandtold reporters in Montreal last week that both she and Prime Minister Trudeau are holding talksandshe'sconfident they willget a deal soon.
"I'm not going to give you specific timelines because we're negotiating now, and sort of negotiating is the wrong word we're getting through with the Europeans, across that final mile to the finish line," the minister said.
Anti-American suspicions
The investor-to-state dispute settlement (ISDS) mechanism Canada negotiated onCETAwas consistent with other deals.
As with Chapter 11of the North American Free Trade Agreement (NAFTA), businesses are protected from arbitrary government decision-making. The opportunity for corporations to recover damages aims to forcegovernments to fulfilthetrade deals they sign, or be held accountable.
Idon't think it could pass the European Parliament asit stands now- Maude Barlow
"The debate over whether ISDS provisions should be intrade agreements is over," said Adam Taylor, now with Ensight Canada, who worked for former Conservative minister Ed Fast during the negotiations.
"There is strong consensusthat they are good, they protect businesses and theyshould be part of these ambitious, 21st-century tradeagreements," he told CBC News.
But critics point to how expensive things can get for taxpayers when corporationssue governments for interferingwithtrade.
Americans have provenparticularly skilled at winning, ordragging out, thesedisputes. And that's the problem.
"Everything started when we begannegotiations with the U.S.," Coninsxtold CBC News. While CETA would have beentransparent and preserved a state's right to regulate, she said, applying its ISDSto a biggertrading partner changed things.
"Dealingwith the U.S. sometimes raises other concerns thandealing with Canada," she said.
Anti-American suspicions have fuelled an anti-trade movement that draws hundreds ofthousands of protestersand the attention of politiciansin key countries like Germany and France.
Can't pass with 'poison pill'
"A creative solution is needed," Taylor said, using a trade negotiator's term for a negotiatedcompromise, lestISDSbecome a "poison pill that derails the deal altogether."
IfISDSisa no-go, or red line, for certain EU legislators, it's prudent for Canada to find a solution, he said.
Veteran campaignerMaudeBarlowfrom the Council of Canadians has been inEurope trying to mobilize opposition.
"Idon't think it could pass the European Parliament asit stands now," she said.
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Europeans now see things as a two-part North American deal: part one isCETAwith Canada, and its passage sets up part two with the U.S.
Even if part two fails, American corporations with branch plants in Canada could still take aim at European policies, she's argued.
Facing these politicalheadwinds, the EU proposed a new Investment Court System (ICS) this fall. Unlike the case-by-case ad hoc tribunals that adjudicate in North America, this suggestspermanently-appointed judges, a formal court of appeal and clear rules to make things fair, particularly for small and medium-sized businesses.
But Barlow'scollaborators believethe compromise might beworse, formalizing rights for foreign corporations that domestic companies would not have in the newcourt.
They'd prefer to defeat the deal as is.
"I'm sure if the government is going to do it, it wouldlike to do it as quietly as possible, but it will beimpossible to keep it quiet," Barlow said.
Americans left 'pissed off'?
Americans aren't receptive to the new court idea.Neither, at least fully, is Canada.
In an article written for a Polish newspaper last week and translated for Maclean's magazine by Canada's embassy in Warsaw, Canada's lead negotiator, Steve Verheul, candidly admits that the opposition to ISDScomes as a "significant surprise." (AmbassadorConinsx told CBC News her side didn't foresee it either.)
Speaking to the Polish audience,Verheul tips Canada's hand: "Canada can agree to some of the changes," the translation reads, but we have concerns that the [proposed court]is significantly more complicated and expensive. It also does not guarantee that a case will be heard by the most appropriate panel of judges."
"We think itwill bring more assurances for some, but not morecosts," Coninsxtold CBC.
Trade lawyer Mark Warner, part ofOntario's legal team during the CETAtalks, agreeswith Verheulthat while NAFTA's ad hoc tribunals are composed of recognized experts, the kind of generalist judges named to thispermanent court could lack tailoredexpertise.
It all puts Freeland in a tight spot if she takes seriously hermandate lettermarching orders to proceed withratification as quickly as possible.
"I think the Americans will be pretty pissed off at us," Warner told CBC News.
If Canada agreesto a compromisethe U.S. doesn't want,"it's like throwing a finger into their eye. And I thought Justin Trudeau said he was going to have better relations with [Washington.]"
A side deal could be "a nice little talking point" that sets the Liberals apart, similar to what the Chrtien government did with its side deals on labour and the environment when NAFTA came in,Warner said.
"They could say 'see, we'renot doing Stephen Harper's bidding, we got this fromthe Europeans,'" but they'd be left with both diplomatic and "architectural"issues laterif CETAisn't consistentwith other North American deals, including the proposed Trans-Pacific Partnership deal of 12 Pacific Rim countries.
"We do most of our trade with the Americans, not with Europe," Warner said. "I wouldn't do it."
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