What is CETA?
The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada is a highly ambitious trade agreement that aims to remove 99% of all tariffs on trade and increase corporations’ unconditional access to markets in the EU and Canada. As with the Transatlantic Trade and Investment Partnership (TTIP), CETA is promoted on the grounds that it will bring economic benefits. How these benefits are calculated depends on the assumptions that researchers make. Official projections are for minimal gain in Gross Domestic Profit (an increase the EU’s GDP growth by a little over 0.01 percent per year). Alternative projections dispute this and suggest net losses in GDP, as well as job losses, wage compression and net losses of government revenue (see, for example http://www.ase.tufts.edu/gdae/policy_research/ceta_simulations.html).
CETA is a so-called ‘new generation trade deal’ that, besides removing most tariffs, will reduce regulation and therefore lessen governmental control over corporations. Areas covered by CETA include domestic regulation, public procurement (the process by which public authorities, such as government departments or local authorities, buy work, goods or services), an extensive array of services, and the mutual recognition of professional qualifications. The treaty also includes a revised version of Investor-State Dispute Settlement (the ‘Investor Court System‘): under this system, tribunal meetings will be open to the public (except where there is an issue of commercial confidentiality) and the tribunal’s decisions can be appealed. However, the right of corporations to by-pass domestic courts and challenge the decisions of elected governments remains intact. So too does the unfair advantage ICS gives to multinationals – domestic companies cannot make use of ICS.
CETA marks the first time the EU has agreed to open up access to the service sectors of its member states on the basis of ‘negative listing’. Negative listing means that all services will be included in the treaty unless explicitly excluded, and this even covers new services that don’t exist now but may emerge in the future. Public services are not adequately protected: although there are some (narrow) exclusions, these are for public services “supplied in the exercise of governmental authority”, i.e services carried out “neither on a commercial basis nor in competition with one or more economic operators”. Because private companies are now involved in almost all traditional public sectors, exclusions for public services are effectively limited to core ‘sovereign’ functions like law-enforcement or the judiciary.
In addition, CETA’s negotiators have accepted demands from industry to liberalise (open up markets) and privatise public services, like the NHS, through ‘standstill’ and ‘ratchet’ mechanisms. These serve to lock the terms of the agreement and only allow further liberalisation and prohibit any reversals – even when past decisions have turned out to be failures. This could threaten the growing trend of taking back public services into public control (e.g water services in France, Germany, Italy, Spain, Sweden, and Hungary; energy grids in Germany and Finland; and transport services in the UK and France) in response to poor performance by private companies.
Even if public services are exempted from the agreement, they are not immune from the Investment Court System (ICS), the investment protection measure, making regulations in public service sectors vulnerable to influence by all kinds of private investors.
Secret negotiations on CETA were completed in September 2014. It then went through a process of ‘legal scrubbing’ and translation into all the languages of the EU. In July 2016 it was decided that CETA would be a ‘mixed’ agreement, (see below): after ratification by the European Parliament it must go to the individual parliaments of the EU member states for their agreement – a process that may take up to four years. However, much of the treaty can be ‘provisionally implemented’ before this (more below).
What it means for CETA to be a ‘mixed’ agreement
Contrary to expectation, when submitting the treat to the European Council, the European Commission proposed that CETA should be a ‘mixed” agreement – that is, that because it deals with non-trade as well as trade issues, it touches on the competence of EU member states as well as that of the European Union. As EU Trade Commissioner Cecilia Malmstrom explained,
This proposal means that it may take years to fully ratify CETA, or that it may not get ratified at all. In theory it takes only one EU member state to veto the agreement for the whole deal to fail. However, there will be considerable pressure on member states to ratify the treaty and those countries that have concerns may abstain, rather than vote against it, in effect allowing ratification.
CETA has raised considerable concern among a number of EU member states, such as Holland, France, Greece, Romania and Bulgaria. In Germany, for example, focusing on CETA’s investment protection clauses, regulatory cooperation and impact on human rights, the political party Die Linke filed a law suit against the trade deal in Germany’s constitutional court (http://www.politico.eu/pro/german-leftist-party-files-lawsuit-against-eu-canada-deal/).
In Belgium, the regional parliament of Wallonia passed a resolution that would have denied the national government the power it needs to support the European Council’s decision to sign CETA (http://www.pour.press/good-news-the-war-on-ttip-and-ceta-can-be-won/). (Belgium has a federal structure and the parliaments and governments of its federal bodies cannot be overruled by their national counterparts. Some of CETA’s provisions come within the competence of Belgium’s regional, rather than national, parliaments). Wallonia and three other regional governments within Belgium had concerns over a number of issues, particularly about the inclusion of ICS. On 27th October 2016, Wallonia finally accepted a compromise, which involved the addition of 27 non-binding ‘clarifying interpretations’ – apparently of dubious legal validity. However, Wallonia has said it will not ratify CETA unless there are changes to ICS. In addition, Belgium requested that the European Court of Justice be asked to decide whether ICS (available only to foreign investors) is incompatible with EU law. However, in November, the EP voted to reject this request.
Where things stand now
CETA was signed by the Canadian Prime Minister and top EU officials on 30.10.16. However, formal adoption of the European Council’s decision to sign CETA only took place after the European Parliament (EP) gave its consent on 15th February 2017.
Next, as a ‘mixed’ agreement, CETA has to be presented to the individual EU member states’ national and federal parliaments (38 in all) to be ratified.
Significantly, the European Council doesn’t have to wait for the full ratification process to be completed before it can begin to implement CETA: it can implement parts of the treaty that don’t fall within member state competence on a provisional basis before the treaty has been considered by the parliaments of EU member states. Provisional implementation could begin from as early as March 2017 (http://www.europarl.europa.eu/news/en/news-room/20170124IPR59704/ceta-trade-committee-meps-back-eu-canada-agreement).
However, a German constitutional court ruling in October 2016 apparently means that a CETA’s most controversial provision (Investment Court System) can’t come into force until the treaty is approved by all member states and parliaments – something that, if there is such approval, could take two to three years. It looks like this same court ruling will also mean that a number of other provisions, such as those affecting the protection of workers, or mutual recognition of qualifications, can’t be provisionally implemented either (http://canadians.org/blog/ceta-moves-forward-without-controversial-investment-protection-provisions).
If the treaty is not ratified by member states’ parliaments, the process for reversing provisional implementation is unclear. At the same time, it’s not entirely clear whether ratification by national parliaments is all that relevant: the German government has apparently received legal advice that the European Council has the final say on ratification and is not bound by the decisions of member states’ parliaments.
The process for the UK parliament to scrutinise CETA has been sidelined. In September 2016 the European Scrutiny Committee recommended an early debate on CETA to take place on the Floor of the House of Commons, in response to the unprecedented public interest in this and other ‘new generation’ trade agreements, and the complex legal and policy issues they raised for the UK. The House of Commons’ European Scrutiny Committee issued the government with a waiver that allowed it to sign CETA at the EU Council of Ministers, on but conditional on an urgent debate taking place in the UK Parliament. (This waiver did not extend to the provisional application or conclusion of CETA). The Committee required that the debate took place before provisional implementation. However, the UK government, after apparently agreeing with this condition, allowed provisional implementation without debate or any parliamentary scrutiny. (http://www.globaljustice.org.uk/news/2016/oct/26/liam-fox-forced-apologise-ignoring-parliament-support-ceta-trade-deal).
A debate in the Commons – promised by the end of January 2017 at the latest – failed to materialise. Instead on February 8th there was a little publicised debate before a small committee of MPs, followed by a ‘deferred division’ – a relatively new process that allows MPs to vote on a whole range of issues discussed over the previous four days, by ticking a list of boxes. (This process has been seen by some as ‘unsupportable’ as it breaks with the tradition of voting directly following a debate, and allows third party influence.) (http://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN00612#fullreport.) The deferred division resulted in a vote in favour of a motion stating that the House had considered various European documents on the signing of CETA and its provisional implementation.
These procedural failures that prevented proper parliamentary scrutiny of CETA in the UK have caused deep disquiet, especially as it appears that emails from the Department of International Trade show departmental officers querying whether they had to actually set a date for a debate on CETA, or just be seen to be “in the process of scheduling a debate” (http://www.barrygardiner.com/barry_challenges_the_government_to_allow_parliament_to_debate_ceta).
This debacle also raises issues about any final process for ratifying CETA or any other treaties in the UK. It appears that the process is deeply floored. It seems, for example, a debate does not happen as a matter of course, and that, even if a vote takes place, there is no way for the UK to decisively veto an agreement (see our page on TTIP for more details).
CETA and the NHS
CETA is very much about ‘liberalisation’ or opening up services to investment from international investors. If a member state does not exclude services in a trade agreement, it’s making an almost irreversible commitment to keeping those services permanently open to these investors. So, as CETA has been agreed by the EU Parliament while the UK is still a member of the EU, ICS will come into force once (or if) the treaty has been ratified by the EU member states. This means that for some years to come, a future UK government planning to reverse privatisation of the NHS would risk being sued by any Canadian corporations that had invested in the NHS (see ‘CETA and Brexit’, below). The UK government could also be sued by other transnational health companies with subsidiaries based in Canada – it’s worth remembering that 80% of US companies operating in the EU also have bases in Canada.
Although the European Commission and UK government state that health services are exempted from CETA, there is concern that the definition of health services is too narrow and they will not be protected. And as mentioned above, CETA includes a ‘ratchet’ clause which locks in any move towards the privatisation of services, meaning that services cannot be returned to their position pre-CETA. Plus, because CETA uses the ‘negative list’ approach, only services actually listed in the agreement are excluded from it. This means that new health services that might emerge in future and that cannot be foreseen now will not be excluded.
In addition, the kind of access that CETA gives to procuring goods and services on behalf of the government could restrict the UK government’s ability to support local and not-for-profit providers and lead to more NHS jobs being outsourced to private firms, where staff are often forced to do the same work with worse pay and working conditions. Apparently,
CETA’s chapter on labour rights is not enforceable, and so could undermine the rights of workers in public services like the NHS, as well as setting a precedent for TTIP.
Price controls on goods such as medicines could be removed if these are seen as barriers to trade or to limit the profits of transnational corporations such as drug companies. This could have serious implications for the public purse (https://corporateeurope.org/sites/default/files/attachments/public-services-under-attack.pdf).
Opening up long-term care to multinational investors could also lead to asset-stripping by financial investors (the cause of the collapse of Southern Cross in the UK, where a number of residential care homes had to close). (http://www.globalresearch.ca/public-services-under-attack-through-ttip-and-ceta-atlantic-trade-deals/5483012)
CETA and Brexit
As CETA has been ratified by the European Parliament – i.e. before the British exit from the EU has been negotiated – the UK is temporarily included in the deal (http://www.cbc.ca/news/politics/brexit-ceta-canada-eu-trade-deal-1.3650708). EU law and treaties will still apply to the UK until it has formally left the Union, a process that may take from two to five years. Investments made by Canadian corporations (or those multinationals with subsidiaries in Canada) between the implementation of CETA and the UK’s departure from the EU will continue to be protected by the investment protection measure, Investment Court System (ICS) for a further 20 years. http://www.mishcon.com/assets/managed/docs/downloads/doc_2850/TTIP_Project_v6_PJ_PROOF.pdf).
As mentioned above, the European Commission reluctantly decided that CETA has to be a ‘mixed’ agreement and so needs to come to EU member states’ parliaments for ratification. But it’s unclear how the UK’s intention to withdraw from the EU will affect its role in the ratification of the treaty. For example, even supposing the UK had an effective way to veto the deal, it’s unclear whether its veto would be seen to have any legitimacy by the other EU member states.
CETA in relation to other trade deals
In many respects, CETA is very similar to TTIP, which appears to be more or less dead in the water following the election of President Trump.
It’s being suggested that CETA will be used as a template for future bilateral trade deals that the UK wants to negotiate after Brexit.