BE­HIND THE SCENES OF THE CETA DEAL

Toronto Star - - FRONT PAGE - Paul Wells

Ne­go­tia­tors Chrys­tia Free­land and Steve Ver­heul tell the Star’s Paul Wells how it all came to­gether,

Pol­i­tics is of­ten a mix of emo­tion and cal­cu­la­tion. It’s im­pos­si­ble to elim­i­nate ei­ther im­pulse. Per­haps it’s un­wise to try. Take the mo­ment when Chrys­tia Free­land walked out of talks on Canada-Euro­pean Union trade in Brus­sels on Oct. 21.

“I did not ac­tu­ally cry. I think the Bel­gian press had it right: I was vis­i­bly moved,” Free­land said dur­ing an hour-long in­ter­view in her of­fice in Par­lia­ment’s Cen­tre Block. “The emo­tion was real; the de­ci­sion not to con­ceal it was in­ten­tional.”

Now that both sides have signed CETA, the Com­pre­hen­sive Eco­nomic and Trade Agree­ment be­tween Canada and the EU, a nearly decade-long ne­go­ti­a­tion is done.

In sep­a­rate in­ter­views, Free­land and Steve Ver­heul, the Global Af­fairs of­fi­cial who was Canada’s chief ne­go­tia­tor with the Euro­peans from the be­gin­ning, dis­cussed their work in de­tail. Ver­heul had a broad man­date and con­sid­er­able free­dom from Stephen Harper. For years after for­mal ne­go­ti­a­tions be­gan in 2009, he was left to do his work with­out in­ter­fer­ence from his Con­ser­va­tive po­lit­i­cal mas­ters.

“There was not a lot of po­lit­i­cal over­sight or even po­lit­i­cal in­ter­est at that stage.”

Progress was fast. The two sides set a goal that 90 per cent of bi­lat­eral trade would be­come duty-free im­me­di­ately.

They soon achieved that goal, then ratch­eted it up to 95 per cent, fi­nally reach­ing 98 per cent.

“All of that was done at the ne­go­ti­at­ing ta­ble,” with­out in­volv­ing elected politi­cians, Ver­heul said. “The Euro­peans were an­tic­i­pat­ing that we would be de­fen­sive on some mea­sures. I think they were a lit­tle sur­prised that . . . we were push­ing them to be much more am­bi­tious across the board.”

Only near the end of his decade in of­fice did Harper need to make po­lit­i­cal de­ci­sions on sen­si­tive ar­eas such as agri­cul­ture and phar­ma­ceu­ti­cals. He flew to Brus­sels twice, in Oc­to­ber 2013 and Au­gust 2014, to sign agree­ments with the Euro­peans. But even be­fore the Con­ser­va­tives’ de­feat in the 2015 elec­tion, CETA was in trou­ble.

Free­land spent a year as trade min­is­ter putting out fires. Coun­try after coun­try threat­ened to block the deal — Ger­many, then Aus­tria, then Ro­ma­nia and Bul­garia, then Bel­gium. “It was sort of a ma­tryoshka,” Free­land said, re­fer­ring to the tra­di­tional nested wooden dolls from Ukraine, her mother’s ances­tral home.

“Each time we solved (a dis­pute), a new one emerged. And each new CETA prob­lem was a smaller coun­try, but a tougher one.”

The heart of the trou­ble was the so-called in­vestor-state dis­pute set­tle­ment pro­vi­sion, or ISDS, a mech­a­nism com­pa­nies from ei­ther side could trig­ger if they felt gov­ern­ments on the other side had acted in a way that would harm their com­mer­cial po­si­tion. The dis­pute would go to a spe­cial panel that would act as an ar­bi­tra­tor. To crit­ics in both Canada and Europe, ISDS looked like a plan to give spe­cial rights to for­eign multi­na­tion­als that weren’t avail­able to do­mes­tic com­pa­nies. The whole process seemed shrouded in se­crecy.

The Euro­peans had started ne­goti- at­ing an even big­ger trade deal with the Obama ad­min­is­tra­tion in the U.S. Driven by sus­pi­cion of big Amer­i­can cor­po­ra­tions, op­po­si­tion to in­vestor-state dis­pute set­tle­ment spiked in Europe. In Jan­uary 2015, the Euro­pean Com­mis­sion re­leased the re­sults of an on­line con­sul­ta­tion on in­vestor-state mech­a­nisms. Of 150,000 re­sponses, 97 per cent ob­jected to in­vestor-state dis­pute set­tle­ment in a treaty with the Americans.

Ver­heul started to hear grum­bling. “They had a num­ber of mem­ber states that were start­ing to say, ‘We can’t agree to an out­come that’s go­ing to have a tra­di­tional ap­proach to in­vestor-state dis­pute set­tle­ment,’ ” he said. But Harper had no in­ter­est in re­open­ing the matter.

That changed after the Lib­er­als won the 2015 elec­tion.

“I had writ­ten a book called Plu­to­crats,” Free­land said, “and I was very aware of is­sues of in­come in­equal­ity and, more broadly, is­sues about how 21st-cen­tury glob­al­iza­tion wasn’t work­ing for every­body.”

In her first meet­ings with de­part­men­tal of­fi­cials after she be­came trade min­is­ter, she asked how trade pol­icy could ad­dress those con­cerns.

“Al­most im­me­di­ately, the an­swer from the department was, ‘There could be things that we could do with CETA.’ ”

Free­land found a kin­dred spirit in Ce­cilia Malm­strom, a for­mer Swed- ish cabi­net min­is­ter who serves as the EU’s Trade Com­mis­sioner. In an early phone con­ver­sa­tion, they agreed they had a prob­lem. At the World Trade Or­ga­ni­za­tion min­is­te­rial con­fer­ence in Nairobi, they dis­cussed reme­dies. At Davos in Jan­uary, they agreed on de­tails. On Feb. 29, they an­nounced a rene­go­ti­ated ISDS chap­ter in CETA.

The re­worked in­vest­ment chap­ter “ab­so­lutely es­tab­lishes the paramount right of gov­ern­ments to reg­u­late in in­ter­ests of en­vi­ron­ment, on labour stan­dards, on de­fend­ing the pub­lic sec­tor,” Free­land said. “Gov­ern­ments have a clear right to re-na­tion­al­ize, so there’s no ratchet ef­fect on pri­va­ti­za­tion.” And the rene­go­ti­ated treaty makes it “very clear that the loss of profit, in and of it­self, does not give you re­course to dis­pute set­tle­ment.”

At first, the changes seemed to calm the Euro­pean cen­tre-left. In Ber­lin in April, Free­land met Sig­mar Gabriel, the leader of the SPD, Ger­many’s so­cial-demo­cratic party, who serves as vice-chan­cel­lor in a coali­tion gov­ern­ment with the cen­treright Angela Merkel. Gabriel said he had been con­cerned about CETA, but liked the changes. But as spring turned to sum­mer, Gabriel’s party started push­ing back.

Late in the sum­mer, Free­land said, “he got in touch with me, quite ur­gently, and said, ‘We have some real con­cerns here. Let’s fig­ure out a way through it.’ ”

To­gether, the Cana­di­ans and the Ger­mans or­ga­nized a diplo­matic blitz. Gabriel came to Mon­treal, where he met with Trudeau on Sept. 15. The two put out a joint state­ment in which Gabriel “rec­og­nized that the new Cana­dian Gov­ern­ment strength­ened CETA.”

Four days later, Gabriel’s SPD had a spe­cial con­ven­tion in Wolfs­burg, west of Ber­lin. CETA was the only item on the agenda. Gabriel had an­nounced that if his party would not sup­port the treaty he would step down as its leader. Free­land spoke to the con­ven­tion, an ex­tremely rare in­ter­ven­tion from a Cana­dian pub­lic fig­ure.

A large ma­jor­ity of del­e­gates voted to en­dorse CETA. That was a Mon­day. On Wed­nes­day, Free­land went to Vi­enna, Aus­tria — “where we dis­cov­ered it was worse than Ger­many.” Chan­cel­lor Christian Kern said he didn’t like CETA. The main tabloid news­pa­per was on a cam­paign against the treaty. Free­land gave Kern a Ger­man edi­tion of her book. Gabriel started to work on him in pri­vate. Fi­nally, at the be­gin­ning of Oc­to­ber, Kern would say his con­cerns were as­suaged.

The treaty was run­ning out of op­po­nents. Ro­ma­nia and Bul­garia had been won over in July, when Im­mi­gra­tion Min­is­ter John McCal­lum moved to set­tle a dis­pute over visa re­quire­ments. That left Bel­gium. Charles Michel, the Bel­gian prime min­is­ter, was a CETA ally. But Paul Mag­nette, the min­is­ter-pres­i­dent of the French-speak­ing re­gion of Wal­lo­nia, was block­ing a par­lia­men­tary rat­i­fi­ca­tion vote.

Free­land and Ver­heul flew to Brus­sels to un­tan­gle the knot. It was hardly clear they would suc­ceed. On the day be­fore she walked out of the ne­go­ti­a­tions, Free­land’s Ottawa staff launched what they called “Pro­jet Wal­lonie.”

“We re­al­ized we had to treat the Wal­lo­nian leg­is­la­ture like a po­lit­i­cal cam­paign. Like get­ting a pri­vate mem­bers’ bill through (Par­lia­ment) or some­thing.” Ev­ery fran­co­phone Lib­eral MP in Ottawa was given a list of mem­bers of the Wal­lo­nian leg­is­la­ture to call. In the end, more than 50 re­ceived friendly calls from Ottawa. “Not to talk about the ins and outs of the deal, but just to make it about Canada and about la Fran­co­phonie. Ev­ery­one in­tro­duced them­selves. They talked about the rid­ing they were from . . . and just ex­plain why this agree­ment was so im­por­tant to them as a link be­tween Canada and Wal­lo­nia.”

Late on the evening of Oct. 20, Trudeau called his Bel­gian coun­ter­part, Michel, to urge the Euro­peans to get out and push CETA harder from their end. The call landed at 3 a.m. Fri­day, Oct. 21, in Brus­sels. Later that day, Free­land walked out, care­fully cal­i­brat­ing her emo­tional dis­play.

Did she think CETA was dead? “I thought it might fail.”

But Martin Schulz, the pres­i­dent of the Euro­pean Par­lia­ment, tele­phoned Trudeau and asked that Free­land visit Schulz be­fore fly­ing home from Brus­sels. Schulz’s meet­ings with Free­land and Mag­nette on Oct. 22 showed CETA wasn’t dead. After an­other week of ne­go­ti­a­tions among Euro­peans, Trudeau and his coun­ter­parts signed the fi­nal text of CETA. Free­land said she is left with a nag­ging sense of work left un­fin­ished.

“Many peo­ple feel 21st-cen­tury global cap­i­tal­ism is not work­ing for them. That’s a very big thing to say. And it’s true,” she said. “What is go­ing to be the sym­bolic tar­get on which we can con­cen­trate all our jus­ti­fied rage? Trade agree­ments have be­come part of that.”

She be­lieves the changes to CETA’s ISDS lan­guage helped it pass. But “the an­swer has to be about more than trade deals be­cause the anx­i­ety is about more than trade deals. The anx­i­ety is this broader im­pact of 21st-cen­tury global econ­omy. So part of the an­swer is, tax the 1 per cent more and cut taxes on the mid­dle class. In­crease your so­cial wel­fare sup­port.

“I don’t think this is just about find­ing dif­fer­ent words. The con­cerns many peo­ple have are very real and we need to ad­dress them in a real way.” Paul Wells is a na­tional af­fairs writer. His col­umn ap­pears Wed­nes­day, Fri­day and Satur­day.

SEAN KIL­PATRICK/THE CANA­DIAN PRESS

Min­is­ter of International Trade Chrys­tia Free­land spent a year putting out fires that threat­ened CETA, Paul Wells writes.

PA­TRICK DOYLE/THE TORONTO STAR

“The Euro­peans were an­tic­i­pat­ing that we would be de­fen­sive on some mea­sures,” says Steve Ver­heul, Canada’s chief ne­go­tia­tor for CETA.

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