LexSage

Is the Canada-EU CETA Dead?

October 23, 2016

As a trade lawyer, I remain optimistic that the Canada-EU Comprehensive Economic and Trade Agreement (“CETA”) will be signed. I am not ready to issue a “call of death”.  However, the CETA deal is in critical condition.  Canada has walked away from the table because of the actions of Wallonia.  The good news is that many people are working hard to see that CETA survives.  But, there are those who wish for the obituary to be written.

Recent experience has demonstrated that large trade deals are no longer possible.  CETA, if it survives and is ratified, may be the last major trade deal to be signed this decade. The Transpacific Partnership Agreement ("TPP") is unlikely to proceed under President Clinton or President Trump. It may be that only small bilateral trade deals are possible for the next decade. It is most likely that any new activity at the WTO is doomed for failure as small regions (with an effective veto) will have learned from the Wallonia example.

Timeline

Before I discuss about where we are and where we are going, we need to review where we came from:

• In June 2007, Canada and the European Commission agreed to conduct a joint study examining the costs and benefits of pursuing a closer economic partnership.
• In October 2008,  Canada and the EU issued a joint study entitled “Assessing the Costs and Benefits of a Closer EU-Canada Economic Partnership”.
• In March 2009, the joint report was finalized.
• In May 2009, Prime Minister Stephen Harper, EU President Mirek Topolánek and European Commission President José Manuel Barroso, announced the launch of CETA negotiations.
• In October 2009, Canada and the EU engaged in the first round of CETA negotiations.
• By October 2011, nine formal rounds of CETA negotiations are completed.
• In October 2013, Prime Minister Harper and José Manuel Barroso announced that Canada and the EU had reached an agreement in principle.
• In August 2014,  Canada and the EU announced that they had reached a complete text of the Canada-EU CETA, marking the conclusion of negotiations. Canada and the EU commenced the legal review and translation of the text into the other 22 EU treaty languages.
• In September 2014, Canada and the EU released the text of the CETA.
• In February 20916, a joint statement is issued by Canada and the EU after CETA is revised to address concerns within the EU.
• In July 2016, the revised text of CETA is released.
• In October 2016, Canada meets with counterparts in the EU to address additional concerns.
• On October 13, 2016, a German Court dismisses a legal case brought to block CETA.
• On October 14, 2016, Wallonia’s Parliament indicates they will veto CETA.
• Canada and the EU work on a joint declaration to clarify the CETA and reinforce some important points in an attempt to alleviate the concerns of Wallonia.
• On October 21, 2016, the negotiations break-down due to demands by Wallonia.
• On October 22, 2016, Martin Schultz has meetings with Canada and Wallonia and announces that more time is needed.

Where are we now?

On October 21, 2016, Mr. Paul Magnette attempted to extract more concessions out of Canada because he believed that he had Canada backed in a corner.  At this point. Canada’s Trade Minister Chrystia Freedland walked out of the negotiations (as she should).  She issued the following statements:

“Canada has worked, and I personally have worked very hard, but it is now evident to me, evident to Canada, that the European Union is incapable of reaching an agreement even with a country with European values such as Canada, even with a country as nice and as patient as Canada.”
“Canada is disappointed and I personally am disappointed, but I think it’s impossible. We are returning home. At least I will see my three children tomorrow at our home.”

She indicated that she was heading home to Canada – but stayed in Belgium overnight to attend meetings in the morning of October 22.

As at 8:30 AM on October 22, 2016, Canada’s Trade Minister Chrystia Freedland correctly stated that “[t]he ball is in Europe’s court and it’s time for Europe to finish doing its job.”  Canada is not prepared to reopen the CETA again so that Wallonia can extract further concessions.

Where do we go from here?

There is not much that Canada can do while the European Union addresses their internal issues.  Canadians are patient.  We have come this far, we can give the EU some time to determine the appropriate internal compromise (understanding that Canada is not willing to renegotiate the CETA).  Also, we can wait for the European Court of Justice (“ECJ”) decision regarding the EU-Singapore challenge on ISDS (Investor State Dispute Settlement).

To the extent that Wallonia is worried about a future trade negotiation with the Untied States, Canada cannot fight that ghost of the future.  It is unlikely that President Clinton or President Trump will be able to commence comprehensive negotiations with the EU (especially in light of Brexit) and even less likely that the United States will be the giver in the negotiations. The United States is not going to just sign on to accede to CETA – that will never happen.

That being said, it is important for Canada to understand the specific concerns that need to be addressed and whether further clarifications (not concessions) are in Canada’s best interests. If Canada determines that further language relating to the Investment Chapter would benefit Canadians, it may possible to offer such clarifications to allow Wallonia to save face.  If Canada determines that there are benefits to Canada by addressing additional concerns, why wouldn’t we.  What might hold Canada and the EU back in Article XXIV of GATT, which requires that in any new free trade agreement “the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) [must be] eliminated on substantially all the trade between the constituent territories in products originating in such territories.”

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or by email at cyndee@lexsage.com.  

This article was originally published on www.Canada-USBlog.com. Republished with permission.