Corporate Sovereignty Helps To Bring EU-Canada Trade Deal To Brink Of Collapse

The trade deal between the EU and Canada, known as CETA -- the Comprehensive Economic and Trade Agreement -- is remarkable for the fact that it has still not been signed and ratified, even though its completion was "celebrated" over two years ago. That's partly because of growing resistance to the inclusion of a corporate sovereignty chapter -- also known as investor-state dispute settlement (ISDS). In an attempt to head that off, the European Commission persuaded Canada to swap out vanilla ISDS for a new, "improved" version called the Investor Court System (ICS). As Techdirt noted before, this is really just putting lipstick on the pig, and doesn't change the fact that companies are being given unique privileges to sue a country for alleged harm to their investments using special tribunals, as well as in national courts.

CETA has faced other problems, notably from Bulgaria, Romania and Belgium. The first two said they wouldn't sign because of Canada's refusal to lift visa requirements for their citizens. That blackmail seems to have paid off. The Sofia Globe reports that Canada has agreed to remove the visa requirements from December 2017, and Bulgaria and Romania now say that they will sign CETA.

That leaves Belgium, or more precisely, the French-speaking Belgian region of Wallonia, which, as we noted back in April, was not happy with CETA. A couple of weeks ago, the Walloon parliament confirmed that it would refuse to give its permission for the central government to sign CETA in its name (original in French). Because of the way the Belgian political system works, that meant that Belgium would not be able to sign CETA on October 27, as the European Commission had originally hoped.

That, in its turn, meant that the European Union as a whole would not be able to sign CETA on that day. That's because back in July, European Commission president Jean-Claude Juncker agreed to treat CETA as a so-called "mixed agreement," a deal that must be ratified by all of the EU member states' national assemblies, as well as by the bloc. If Belgium can't do that because of Wallonia, CETA is blocked.

As you might imagine, the Walloons have come under intense pressure to change their mind, from just about the entire EU and Canadian political establishment. Last Friday, Wallonia's Minister-President Paul Magnette told the regional parliament that he still refused to allow Belgium to sign, despite that pressure. As well as being worried about the impact of Canada's agricultural products on Walloon farmers, Magnette singled out corporate sovereignty as a particular worry for him and his colleagues.

The fact that CETA's ISDS/ICS remains the most problematic area can be seen from a fascinating CETA document (pdf) that was recently leaked. It's called the "Joint Interpretative Declaration on the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and its Member States," and is an attempt to offer additional guarantees that are enough to convince Magnette and other CETA skeptics to allow its signing and ratification:

This interpretative declaration aims to provide a clear and unambiguous statement of what Canada and the European Union and its Member States agreed in a number of CETA provisions that have been the object of public debate and concerns. This includes, in particular, the impact of CETA on the ability of governments to regulate in the public interest, as well as the provisions on investment protection and dispute resolution, and on sustainable development, labour rights and environmental protection.

The section on Investment Protection is by far the longest, reflecting the seriousness of the problems there. Here's a key paragraph:

CETA clarifies that governments may change their laws, regardless of whether this may negatively affect an investment or investor's expectations of profits. Furthermore, CETA clarifies that any compensation due to an investor will be based on an objective determination by the Tribunal and will not be greater than the loss suffered by the investor.

As that demonstrates, there is nothing new in the declaration. Nobody is claiming that CETA will stop governments changing their laws, just that the massive fines that can be imposed by supra-national tribunals are likely to discourage them from doing so. Similarly, claiming that those fines will be "based on an objective determination by the Tribunal and will not be greater than the loss suffered by the investor" simply confirms the untrammelled power of the tribunal to impose whatever fine it thinks is appropriate.

As of this weekend, Magnette was still holding out for more guarantees. He has said that he is not against CETA in principle, but does want improvements to it, which offers the European Commission a way out of this crisis that they will surely try to seize. If the interpretative declaration is changed sufficiently, Magnette may be willing to give permission to Belgium to sign.

However, there's another factor. In the face of the continuing problems on the EU side, the Canadians seem to be close to calling the whole thing off. As the Guardian reported:

A landmark trade deal between the European Union and Canada is in meltdown, after Canada's trade minister walked out of talks with the Belgian regional parliament that has been blocking the deal.

The Canadian trade minister, Chrystia Freeland, was on the verge of tears on Friday as she announced the "end and the failure" of talks with the Walloon government.

However the head of the European parliament said late on Friday he would hold emergency talks in a bid to save the deal.

As that indicates, EU politicians are still trying to patch things up, but it's unlikely that Canada will be willing to make yet more concessions to satisfy Magnette. For his part, he said on Sunday night that he was "disappointed" with the Commission's latest attempt to convince him to accept CETA's ISDS (original in French). In any case, it looks increasingly likely that CETA will not be signed on October 27, and that Canada's prime minister, Justin Trudeau, will not be traveling to Europe to do so, which would be a huge diplomatic embarrassment for the European Commission. Corporate sovereignty may not be the only reason CETA is falling apart, but it is certainly one of the main ones. The twists and turns of the Walloon saga confirm just how politically toxic it has become.

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