Werner's Blog — Opinion, Analysis, Commentary
Germany rejects CETA—for now

It has been nine months since Canada and the European Union concluded the Comprehensive Economic and Trade Agreement (CETA) "in principle". All looked fine until a few days ago, when it was announced that Germany rejects a key CETA provision. Thus the future of CETA looks rather uncertain.

At issue is the investor protection offered by CETA, similar to Chapter 11 of the North American Free Trade Agreement (NAFTA). While not expected to be a major issue between Canada and the EU, there is great concern that CETA is the template for the new free trade agreement that is currently under negotiation with the United States, known as the Transatlantic Trade and Investment Partnership (TTIP). If investor protection is offered to Canadian businesses, it will be impossible to deny similar concessions for investor protection to US companies. The European Union's free trade agreement with Canada is a test for the agreement with the United States.

‘The European Union's free trade agreement with Canada is a test for the agreement with the United States.’

German EU diplomats announced in Brussels that the federal government in Berlin is not willing to sign the agreement as it was negotiated last year. For Canadian businesses, investor protection is crucial for operating in the European Union where the quality, reliability, and speed of legal systems can vary substantially across the 28 member countries. Critics of the proposed investor protection for US companies lament the possibility that US companies could prevail in arbitration panels that are not subject to domestic (European Union or national) law. The fear is that US companies might use investor protection to weaken European Union regulations on labour and the environment. As reported in the Süddeutsche Zeitung, the German economics minister, Sigmar Gabriel, declared such protection "superfluous".

As it stands, the future of CETA hangs in the balance, threatened by the dispute over the investor projection awared to US companies through the proposed TTIP agreement. As Steven Chase reports in the Globe and Mail on Saturday: Canada and EU may have to return to bargaining table, experts suggest. The key question is: will Canada agree to sign on to a version of CETA without investor protection, or with much weakened investor protection? With an election looming late next year, the government in Ottawa will be keen to see a timely ratification of CETA.

Posted on Monday, July 28, 2014 at 13:25 — #Trade
© 2024  Prof. Werner Antweiler, University of British Columbia.
[Sauder School of Business] [The University of British Columbia]