BEHIND THE SCENES OF THE CETA DEAL
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.