Trade deals offer new opportunities for exporters outside their own market, creating jobs as well as reducing prices and increasing product choice for consumers at home. But economic development must be sustainable for it to provide lasting benefits.
Trade must go hand in hand with social development and environmental protection. Given the size and economic clout of the EU, trade is also an important tool that we can use to promote our high standards abroad.
This is why modern trade agreements like CETA contain sections dedicated to mutually improving labour rights and protection for the environment.
Reinforcing current levels of protection
CETA locks in current levels of environmental protection through binding commitments, clearly stating that the countries involved must not reduce standards in order to attract trade and investment. This prevents the risk of a race to the bottom. There are also specific commitments on the sustainable use of forestry and fisheries products.
Furthermore, CETA requires both partners to uphold their international commitments and implement multilateral environmental deals effectively, including a specific mention of the Paris Agreement on climate change.
In addition, CETA in no way infringes on the EU’s ability to set high standards in its own legislation, for example on GMOs, hormones in beef, fuel quality, endocrine disruptors and many other topics. Crucially, the EU’s precautionary principle is also safeguarded in the text.
The right of national and local authorities to use environmental and social criteria when handing out public contracts is also enshrined in the treaty.
Right to regulate
Domestically, the EU-Canada deal explicitly recognises the right of governments to regulate in the public interest, including setting what they deem to be an appropriate level of environmental, social, or other protections for citizens.
Although the treaty itself is very long, stretching over 2,000 pages, the EU and Canada have agreed on what is called a Joint Interpretative Instrument (JII), which goes alongside the final text. This is a binding statement of intent from the parties - it spells out in plain English what the partners intend in CETA, and it must be taken into account by lawyers when interpreting the treaty.
CETA preserves the ability of the European Union and its Member States and Canada to adopt and apply their own laws and regulations that regulate economic activity in the public interest, to achieve legitimate public policy objectives such as the protection and promotion of public health, social services, public education, safety, the environment, public morals, social or consumer protection, privacy and data protection and the promotion and protection of cultural diversity. (JII, point 2)
As opposed to what some have argued, this means that Canadian investors cannot sue a government who legislates to protect the environment, even if their profits are affected by changes in regulation. CETA provides for potential compensation for investors only in cases of targeted discrimination or abuse, not in cases of changes of legislation. Indeed, CETA reinforces the right of democratically elected governments to protect citizens and the environment.
A race to the top
As well as guaranteeing current levels of protection, CETA also provides important incentives for the partners to improve environmental protection in the future.
Both Canada and the EU are encouraged to work together on innovative initiatives like eco-labelling, fair trade schemes and corporate social responsibility. Both parties also commit to “to provide for and encourage high levels of environmental protection, as well as to strive to continue to improve such laws and policies and their underlying levels of protection” (JII, point 9).
As a market of 500m people compared with Canada’s 35m, the EU has a lot of leverage over Canadian standards. As is the case now, if Canada wants to sell its agricultural products in the EU it will have to abide by our standards. For example, as explained above, we will not accept any beef grown using hormones, so if Canadian farmers want to sell their products here they must be follow the same guidelines as European beef. As well as protecting the standards we already have in Europe, CETA will therefore most probably have a positive effect on standards in Canada as their exporters alter production processes to meet our standards.
The commitments on the environment foreseen in CETA are binding - i.e. they create legal obligations and if they are not followed then the partner will be in contravention of the treaty. They are also enforceable, through a dispute mechanism involving both parties and with an important role for the public and civil society. However, it is true that there is no application of sanctions following this process. This is, regrettably, standard EU practice - to encourage, rather than force.
It must of course be remembered that just as governments within the EU retain their right to regulate, Canada’s domestic sovereignty must also be respected. They may have some differences in standards, sometimes higher, sometimes lower, but the decision to upgrade them will be one of the Canadian people. And likewise in the EU.
Both sets of standards can move higher together, but change will be rooted in domestic democratic choice, and voted by the respective Parliaments of, in this case, EU and/or its Member States, and Canada.
However, the fact is that Canada has made certain commitments and we would like to be able to hold them to them. After pressure from civil society and Socialist and Democrat MEPs, the European Commission and Canada have committed in the JII to move towards effective enforceability of the chapter on sustainable development. This is the first time that the EU and a trade partner have made such a commitment.
Tar sands oil and fracking
The issue of energy extraction through tar sands in Canada, as well as fracking in Scotland, are clearly issues which are important to my constituents judging by the letters I receive.
In Scotland, the government has imposed a moratorium on fracking, which Scottish Labour supports. The decision on whether to allow fracking is not an EU competence, but a devolved issue - a decision made in Scotland. CETA will not change this. If Scotland wants to continue banning fracking then it can do so. If the rest of the UK decides that it wants to stop fracking for environmental reasons, it can do so. This is because of the strengthened right to regulate clause.
CETA does not affect the EU policy as regards tar sands and it definitely does not encourage the import of tar sands through any of its provisions. Currently almost no energy derived from tar sands is coming into Europe and recent measures adopted by the EU represent a further move towards encouraging the lowering of CO2 emissions. For instance, the EU's Fuel Quality Directive has introduced requirements for fuel suppliers to report the origin of fuels and a methodology on how to calculate CO2 emissions for road transport. Any fuel imported from Canada that derives from tar sands extraction must comply with this legislation, and other EU environmental legislation.
It has been put to me that CETA has somehow already contributed to the weakening of the Fuel Quality Directive. To be clear, this is a completely separate piece of legislation from CETA, and trade negotiations cannot be used to influence policymakers in this way.
And finally: climate-friendly products and general effects of trade on pollution
The main economic advantage of CETA is its unprecedented reductions in tariffs across the board. As a positive side-effect, this includes energy-efficient and renewable energy products such as heat pumps, energy efficiency boilers, parts for winds turbines and solar panels. Cutting costs of these goods at the border will make these products cheaper and spread innovative green technology that can help combat the causes of climate change.
Some NGOs have pointed to the fact that increased trade means an increase in transport emissions. Whilst this argument is fair to the extent that goods travelling across seas and borders will require transportation, it is also true that the majority of additional trade would be transported on boats, which has a much lower environmental impact than land or air transport. In addition, trading more with Canada will probably lead to a slight reduction of trade with some other countries - what is called trade diversion. These two factors should combine to have a zero overall effect on emissions.
In conclusion, CETA is a modern trade agreement between two likeminded partners. The text locks in current progress, whilst laying the groundwork for better social and environmental protection in the future. European standards are protected, and governments retain their right to improve regulations to protect their citizens. Both partners have also committed to make sure that these gains are put into action effectively, acting as a gold-standard template for future EU trade deals.
This blogpost has been edited to remove an incorrect reference to tar sands oil and fracking.