Canada and EU officially sign the trade agreement that could open-up the road to TTIP

José Manuel Barroso, President of the EC, Herman van Rompuy, President of the European Council, and Stephen Harper, Canadian Prime Minister, participated in the EU/Canada Summit which was held in Ottawa. (from left to right) (EC Audiovisual Services, 26/09/2014)

Last Friday the European Union and Canada officially marked the end of five years of negotiations and talks: the Comprehensive Economic and Trade Agreement (CETA) between the two parts was signed. The agreement was presented by the outgoing Commission President Manuel Barroso, the European Council President Herman Van Rompuy and Canada Prime Minister Stephen Harper at a joint news conference on Toronto’s Parliament Hill.

The conference closed a long negotiations process which started on May 6th 2009 at the Canada-EU Summit in Prague. The negotiations were formally concluded on August 1st 2014 when CETA was approved as the replacement of the North American Free Trade Agreement (NAFTA), becoming Canada’s biggest cross-border deal. “It will not only change the game for Canadian businesses,” the Canadian Prime Minister Stephen Harper said, “it will create an entirely new game”.

The text of the deal, which is 1,600 pages long, was published on the EC’s trade website and will go through about nine months of legal examinations before being submitted to the bloc’s 28 national governments and the European Parliament for final approval. President Barroso indeed predicted the final pact would be signed next year, to make CETA begin in 2016. When fully operative, the CETA is expected to increase the two-way trade by 20 per cent, to 26 billion euros ($33 billion) a year, according to the European Commission.

The deal would put an end to 98 % of tariffs on EU-Canada goods trade at the outset, and 99 % after seven years (with NAFTA 29% of the then-existing tariffs were removed – source Financial Post). “Now we will be playing in the big leagues, Canada’s PM Harpers commented on Friday, while Barroso called the CETA “the most advanced agreement in the world today, when it comes to market integration”.

Despite the general optimism in Canada last Friday, many clouds loomed on the agreement the day before and the risk that the signing ceremony could have turned into another embarrassment for both sides was very high. Indeed it was when German Economy Minister Sigmar Gabriel said on Thursday that Berlin would reject the landmark trade pact in its current form, that pressure got quite high. The bone of contention lies in the pact’s “Investor-State Dispute Settlement” chapter of the Text.

The disputed ISDS clause would allow multinationals and private investors to put pressure on governments into weakening their laws on labour, data protection, food standards and the environment, if they feel local laws threatened their investments. “It is completely clear that we reject these investment protection agreements”, German Economy Minister Sigmar Gabriel told a German parliamentary debate on Thursday.

President Barroso minimized the question, saying that “until now all the official communications we have received from Germany were absolutely in favor of this agreement”, but it seems clear that the matter goes a bit deeper than the trade agreement’s architects are trying to show.

Actually the CETA is widely seen as a template for a larger pact between the EU and the United States, the Transatlantic Trade and Investment Partnership (TTIP). That’s why many groups, including trade unions and consumer groups, say that having mechanisms such as the ISDS clause-related ones in the Canada deal would set a wrong precedent. Indeed Germany, in particular, is pressing for a contentious arbitration mechanism to be excluded from the CETA with a view on a final EU-US TTIP final agreement. Therefore Berlin and the other opponents want the CETA to be revised again.

According to the international press, Canada’s PM Stephen Harper said that it is “normal that signatories to the accord might seek minor changes after the deal is signed”, although many say that more likely the agreement will remain untouched. European Trade Commissioner Karel de Gucht told the daily Frankfurter Allgemeine Zeitung on Thursday that the deal should not be modified again right now. “If we re-open negotiations on CETA, the deal will be dead” he said.

Following what could be one of the worst economic crises in the western countries’ history, the world’s biggest developed economies are now seeking ambitious trade deals to eliminate “walls”, create jobs and compete against China. This is what I guess we can see as the official response of these countries to the crisis, as it gunned down economies in a much heavier way than expected.

This way I believe that the road to have this kind of agreement revised once they have been “formally” approved might be quite long: none of the two parts, whether it was Canada or the US negotiating with the EU, would like to lose appeal. None of the part would like to show a lack of commitment in this delicate moment.

“We have an agreement, a good agreement”, Mr. Harper told the news conference. “We have all – and those we represent – committed to it and we will honour those commitments”.