Walkom: The loose thread that could unravel Canada-EU trade deal

The Canadian government has suffered another setback in its elusive search for a trade and investment deal with the European Union. The EU’s top court has confirmed that in at least one controversial area, such deals must be approved by all 28 of the organization’s member states.

Since some EU members, such as Belgium, require the consent of regional as well as national legislatures, this confirms Ottawa’s worst fears: the Comprehensive Economic and Trade Agreement between Canada and the EU must be OK’d by no fewer than 38 separate European parliaments before it comes into full effect.

Tuesday’s ruling by the Court of Justice of the European Union was ostensibly about a 2013 free trade deal between Singapore and the EU. But it sets a precedent for similar yet far more important pacts, including CETA.

In effect, the court ruled that any deal allowing foreign investors to challenge national governments, such as the proposed investment court system within CETA, must be unanimously approved by all EU states.

The investment court system, sometimes called the investor-state dispute mechanism, would allow foreign companies to challenge domestic laws that threaten their profitability. It has long been a flash point in Europe.

Pointing to Canada’s sorry experience with a similar system under the North American Free Trade Agreement, critics argue – correctly – that it lets foreign investors override democratically elected legislatures.

In an effort to appease these critics, the EU agreed last year to treat CETA as “mixed” pact that requires approval from individual member states as well as pan-national European institutions.

Tuesday’s court of justice ruling cements that political decision in law.

Last year, Canada and the EU also agreed to rewrite the investor-state dispute resolution system to make it sound more judicial. That wasn’t enough to mollify the critics, so they then agreed to postpone what they had by then named the investment court system and press ahead with the rest.

In Canada, a bill to implement CETA has passed both houses of Parliament and awaits royal assent.

In Europe, the deal has been ratified by the European Parliament. That was a victory of sorts. Last fall, it narrowly escaped being scuppered by the Walloon region of Belgium.

Still, for something that has been so tentative, CETA is bragged about endlessly. Its passage has been re-announced countless times on both sides of the Atlantic.

Stephen Harper’s Tories boasted about it when they were in power. Now Justin Trudeau’s Liberals do the same, lauding it as an exemplar of the modern trade and investment treaty.

The government says CETA showcases how open Canada is to the world – by which it means how unlike Donald Trump.

Here at home, few dwell any more on CETA’s negatives, such as the rise in drug prices its intellectual policy provisions will encourage.

Nor is there much fretting any more about procurement policies in CETA that will prevent municipalities from favouring local business.

In most Canadian media, CETA is treated as a good thing – a kind of feisty Perils-of-Pauline heroine who manages to escape in the nick of time from assorted Walloons, Trump fanciers and other populist villains.

But it remains very much an incomplete arrangement. Gus Van Harten, an Osgoode Hall trade expert and law professor, says the court ruling confirms that CETA’s investor-state dispute system won’t be finalized any time soon.

“By implication,” he wrote in an email Tuesday, “it has been hasty for the federal government to be pushing approval of CETA in full in Parliament on Canada’s behalf.”

Van Harten calls the as-yet-unimplemented investor court system a major loose end.

He’s right. It is one that could ultimately unravel the entire provisional agreement.

Thomas Walkom is a national affairs writer.

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