Canadian Politics (Federal), Environment, Global Affairs, Labour

What’s the deal with CETA?

Belgium has agreed to support the European Union’s Comprehensive Economic and Trade Agreement (CETA) with Canada, removing a major roadblock to the contentious deal’s implementation. The deal, however, must still be approved by the 27 other EU governments, who may raise objections to its entrenchment of corporate power over the state.

Last Friday, Canadian International Trade Minister Chrystia Freeland angrily stormed out of a meeting with her Belgian counterparts, as the agreement appeared to have collapsed under Walloon dissent, the product of an increasingly global anti-trade sentiment.

Belgium is essentially split in two – a Dutch-speaking Flemish region, Flanders, in the north and French-speaking Wallonia in the south. (There’s also a small German-speaking region in the east.) Flanders and Wallonia must both consent to the deal in order for it to move forward. Today the Walloon government, no doubt under immense pressure from the rest of the EU, agreed to support CETA.

Once the deal is signed, which is expected to occur on Sunday, the European parliament and its constituent nations must ratify it, which could take between two and four years.

So what is CETA? Why was Wallonia opposed and why are Canada and Europe so adamant about its passage?

CETA defined

Like the North American Free Trade Agreement (NAFTA) did with Canada, the U.S. and Mexico, CETA seeks to reduce trade barriers between Canada and the EU. In other words, it would make it easier for Canadian and European businesses to trade with each other by reducing tariffs on foreign goods, which are designed to put domestic industries at an advantage.

“CETA covers all aspects of our broad trading relationship with the EU, including goods, services, investment, government procurement and regulatory cooperation,” according to Global Affairs Canada, so it is very far-reaching, providing Canada with access to a $20-trillion market.

Overall, the Canadian government says 98 per cent of tariffs on goods traded between Canada and Europe will be eliminated.

It will make it easier for Canada to sell maple syrup to Europe, for example, by eliminating the 8 per cent tariff imposed on that product, while making it easier for Germany, Canada’s second-biggest trade partner and largest economy in the bloc, to sell their cars to Canadians by eliminating Canada’s 6.1 per cent tariff on European-made cars.

The question is how will this effect auto manufacturers in Oshawa and Windsor when the Canadian market is flooded with less expensive German cars? There are anti-dumping rules as part of the agreement that created the World Trade Organization, which is still in effect, meaning Germany, in this case, cannot sell its cars below market value. But as the wealthier and more populous nation, Germany has an inherent competitive advantage, able to produce more cars cheaper than Ontario’s struggling auto sector.

The Canadian government’s summary of the pact has vague provisions near the end about “seeking high levels of labour protection” and “commitments to foster environmental governments,” but does not elaborate significantly on how they’ll be achieved.

The U.S. is in the process of negotiating its own CETA-style deal with the EU, known as the Transatlantic Trade and Investment Partnership (TTIP). There’s also the 12-nation Trans-Pacific Partnership (TPP), which would similarly reduce trade barriers between its signatories, including the U.S., Canada, Australia, New Zealand, Mexico and Japan.

Interestingly, the United Kingdom, which voted to leave the EU earlier this year, is part of CETA, as negotiations began prior to the Brexit vote.

CETA can be read in full here.

What does Wallonia have against CETA?

Most controversial, and where it departs most significantly from past trade agreements, is the deal’s investor state dispute settlement (ISDS) mechanism, whereby companies are empowered to sue governments for reducing their profits, which critics say will reduce governments’ ability to impose regulation and was the linchpin of Wallonia’s rejection.

As a condition for Wallonia’s approval, an adjustment was made to have the European Court of Justice approve any ISDS application, which still doesn’t address the issue of shifting power away from elected representatives, for all their flaws, to unelected corporations. It just uses the unelected European judiciary as a middleman.

The problem with this aspect of CETA, writes copyright lawyer Michael Geist, is that the deal has extended its reach by forcing “changes to domestic regulations and the creation of dispute settlement mechanisms that may prioritize corporate concerns over local rules.”

Wallonia has been hit hard by unemployment – 11 per cent, which according to the Financial Times is nearly double that in neighbouring Flanders – so there is little appetite for giving multinational corporations more power to move away.

This is why the Walloons also demanded the ability to re-establish tariffs if a specific agricultural market will be negatively impacted by the deal. They have one year after signing the deal to determine which markets these are.

Walloon Prime Minister Paul Magnette, a social democrat, is now reportedly “extremely happy” with CETA.

Why are the Canadian and European governments so eager?

According to the Globe and Mail, Freeland called CETA “the most progressive trade deal negotiated,” which may not be saying much. While the deal certainly pays lip service to environmental and socioeconomic sustainability, there is little in terms of enforcement.

The same article cites a joint Canadian-EU study from 2011 that says CETA “would boost Canada’s income by up to $12 billion a year,” which “is the equivalent of adding an average of $1,000 to Canadian household incomes,” yet it doesn’t indicate how this wealth will be distributed.

European President Jean-Claude Juncker echoed Freeland when he called the pact “the best and most-progressive agreement we have ever, as a European Union, negotiated,” emphasizing its “new approach to investment that is transparent and … impartial.”

The Globe concedes the agreement is “a mixed bag for Canadian consumers,” with cheaper cars and cheese, “which could take a bite out of the market shares of dairy in Ontario and Quebec,” and more expensive drugs for the average Canadian, due to a two-year extension on European pharmaceutical patents.

Canadian and European leaders are eager to pass CETA because, to put it simply, it’s good for business.  This is precisely why the Canada Business Council, along with its European counterpart, demanded the “swift approval and implementation of CETA to boost trade and investment and create jobs.”

As a result of this rapidity, “The announcement of the completion of CETA was … the first time people in Canada and Europe were allowed to see the official text of the agreement,” reads a statement from the left-leaning Council of Canadians. “The deal was signed without any public consultation.”

In other words, this purportedly transparent deal was negotiated above Canadians’ and Europeans’ heads, primarily to benefit big business. The negotiators will no doubt take credit if some jobs trickle down to the working class.


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