The seeming collapse of the trade agreement between Canada and the European Union (CETA) has created obvious disappointment for International Trade Minister Chrystia Freeland and the entire Canadian government, which made the deal as its top trade issue. Efforts to salvage CETA will undoubtedly continue, but my Globe and Mail column points out that the underlying problem with the agreement is not the complicated European political system that requires support from all member states.
Rather, it is the expansion of trade negotiations from agreements that once focused primarily on tariff reductions to far broader regulatory documents that now mandate domestic legal reforms and establish dispute resolution systems that can be result in huge liability for national governments. This enlarged approach to trade deals, which can also be found in the controversial Trans Pacific Partnership (TPP), run the risk of surrendering domestic policy choices to other countries or dispute tribunals.
If CETA were limited to tariff reductions, it would be relatively uncontroversial. The discomfort with the agreement lies instead in the mandated changes to domestic regulations and the creation of investor – state dispute settlement mechanisms that may prioritize corporate concerns over local rules.
Regulatory provisions in CETA mean that both parties face the prospect of changing national laws to accommodate foreign businesses. For example, CETA requires Canada to expand patent protections, largely due to demands from European pharmaceutical companies. The required changes would add billions to Canadian health care costs by extending the term of protection for popular drugs. Similarly, European countries would face the prospect of altering food and safety regulations as part of their end of the bargain.
The insistence on including investor – state dispute resolution provisions are particularly puzzling. These rules, which allow companies to seek damages where local regulations interfere with their economic expectations, are commonly found in foreign investment treaties with developing countries whose court systems are unknown or viewed as risky by potential investors.
There are no such risks in Canada and Europe, however, since both offer reliable, respected court systems that are widely used by companies from around the world.
The dispute resolution mechanisms are wonderfull if you’re trying to make a deal with a country like today’s Russia where courts can’t be relied on, but a horrible botch if your countries actually have the “rule of law”.
Adding a new dispute resolution scheme that has it’s own private non-appealable courts is a recipe for *centuries* of “softwood lumber” complaints.
” creation of investor – state dispute settlement mechanisms that may prioritize corporate concerns over local rules.”
cf. $25M award by a NAFTA tribunal against Canada because Ontario chose not to proceed with offshore wind turbines.