Five years into Canada-Europe trade deal, full ratification not guaranteed

Canada’s trade deal with the European Union has been operating in draft mode for five years as of Wednesday, raising doubts it will ever be formally implemented.

A dispute over how corporations can sue governments remains unresolved. Yet Canadian trade experts say the deal remains a major win in an era of supplychain shocks and pushback against globalization.

The Comprehensive Economic and Trade Agreement, known as CETA, came into force provisionally on Sept. 21, 2017, with the signatures of the European Commission and the Canadian government.

Since then, Canada-EU trade has risen 33 per cent, amounting to $100 billion in goods and services last year.

It’s meant more exports of everything from seafood to automotive parts to Europe, which has boosted its pharmaceutical and meat exports to Canada.

Yet the deal isn’t legally in place until all 27 members of the bloc individually ratify the deal.

Lawrence Herman, a Toronto trade lawyer, said key parts of the deal around tariffs, digital commerce and public procurement are in place.

“It is in effect in every real way,” Herman said in an interview Tuesday from France.

“I don’t think CETA will ever be officially ratified.”

The most contentious issue surrounds which mechanisms countries can use to seek compensation and rectify disagreements with national, state and provincial governments, known as investor-state dispute settlements.

The idea is for a neutral mechanism to hear out complaints beyond courts, which could be influenced by national governments.

Labour and environmental activists have argued this gives up sovereignty of everything from consumer protection to worker safety.

A German senior court in February rejected arguments that this provision undermines the country’s constitution, but the clause remains controversial in Germany, which is among the 12 countries that haven’t ratified CETA.

Herman said in many of those countries, opposition is only getting stronger. “I just don’t see it ever coming into force definitively,” he said.

Jason Langrish, head of the Canada Europe Roundtable for Business, agrees.

“There’s a good chance it just sort of sits in this limbo,” said Langrish, who worked on CETA’s precursor as part of Canada’s delegation to the European Union, and helped represent industry groups in the CETA negotiations.

“The investor-state (tribunal) has been blown out of proportion,” he argued.

Trade Minister Mary Ng was unavailable for an interview Tuesday as she was travelling abroad.

But her office pointed out that Canada and EU countries will appoint members of the proposed tribunal, who will be “subject to rigorous ethical commitments, as well as a robust appellate mechanism.”

“This agreement is giving Canadian farmers, producers, processors and exporters preferential access to more than half-a-billion consumers across the EU,” said spokesman Chris Zhou.

Langrish said CETA’s main success has been to formalize rules around the large amount of trade the two parties were already doing, making Canada less reliant on the United States.

“As (U.S. President Donald) Trump came and went and protectionism became the order of the day, and we had all these difficulties with China, it was nice to have that relationship with Europe as a bit of a hedge,” he said.

“It sent a signal to the business communities in Canada and the EU, that they were both committed to each other and wanted to make this work as a long-term partnership.”

Langrish said trends in offshoring, immigration and automation have made it harder for politicians to sell trade deals, which themselves are becoming more complex.

That’s because countries have already inked deals on getting goods across borders with lower taxes. That has meant modern trade negotiations involve more complex topics, such as technology regulations, labour qualifications and competition rules.

“The big-bang era of trade deals is over,” said Langrish.