September 2016 (Update November 2016)
Some constituents have written to me about claims made by the NGO Global Justice Now about the ‘provisional application’ of CETA and how investment protection provisions of CETA could bind the UK for up to twenty years, even after Brexit.
What is ‘provisional application’?
Here the picture is much more nuanced than Global Justice Now has concluded. This is not a plan to “rush CETA through before Brexit”, but provisional application is a standard practice with modern trade agreements.
As you may know, trade policy is what’s called an ‘exclusive competence’ of the EU. The European Commission has negotiated trade deals on behalf of the UK since we joined. This makes sense, because together we form a customs area with a common external tariff. As for the ratification of the agreement, this also means that once the EU Council and then Parliament have given the OK to an agreement then it will come into force.
As trade deals have expanded in scope, there are some elements included which remain partially the responsibility of member state governments (‘shared competence’ in the EU jargon). They are then called ‘mixed agreements’. Because there are parts of the deal for which member states are also declared responsible they must also then be ratified by national parliaments.
However, this ratification process can take years and years, as each nation has its own distinct procedure, sometimes reaching down into regional parliaments (like in Belgium). Provisional application therefore means that the bits that the EU is responsible for come into force whilst this national ratification process is ongoing. To be clear, only those parts where the EU has exclusive competence will be provisionally applied.
For a practical example, EU exports to South Korea grew by 55% in the first four years of that deal being in force, at a time when it was provisionally applied. Scotch whisky has been a significant beneficiary of the EU-Korea deal. From 2013 to 2014 exports to South Korea jumped 70%, providing extra employment in Scotland and across the UK. At this point, the agreement was only provisionally applied and had not been ratified by national parliaments, but of course Scottish exporters of whisky were very pleased with the earlier implementation.
Another example is that of the General Agreement on Tariffs and Trade (GATT), the global post-war agreement to lower tariffs to avoid another trade war similar to that in the 1930s which had devastating consequences for the world. The GATT, although signed in 1947, did not come into force until almost fifty years later with the establishment of the World Trade Organisation (WTO) in 1995. This is because a suggested institution to go alongside the GATT, the International Trade Organization (ITO) failed to gain the support of states, even though they supported the provisions in the GATT. From 1948 to 1995 the GATT was provisionally applied, ensuring the benefits of more open trade were not put in jeopardy by the failure of many states to ratify the ITO.
For those parts that are provisionally applied, it is incorrect to say that there has been “little in the way of democratic process”. To be ratified at the European level, any trade deal must first gain the support of the European Parliament - 751 directly elected MEPs who represent their constituents on EU issues the same way that MSPs represent their constituents on Scottish devolved issues in Holyrood. On CETA we have been informed throughout the negotiating process and our veto right means that they have to listen to us. In fact, it was pressure from the European Parliament that led the Commission to remove ISDS from the CETA agreement. They knew that if they left it in would not get through our parliament.
I appreciate that certain aspects of modern trade agreements should be discussed in national parliaments. But overall the democratic responsibility for trade lies with the European Parliament - a democratically legitimate body which represents citizens across the EU. Provisional application must not be used as a political football by those who just want to stop trade deals altogether. National democracy is not the only democracy, and we take our roles here in the European Parliament very seriously.
Will CETA’s investment provisions be in force for twenty years even after Brexit?
I believe the NGO is referring to an article in CETA which establishes that in case the agreement is terminated by a party to the agreement (either Canada or one of the 28 EU states), the investment protection provisions will continue to be effective for a period of 20 years after the date of termination. This article further clarifies that this rule does not apply in case of provisional application of that part of the agreement.
Firstly, it is not clear whether the UK will have to ‘terminate’ the agreement in legal terms, or whether there are other legal options for the UK to withdraw from CETA. Brexit is, after all, uncharted territory. Therefore the article above might never be applicable to us.
Secondly, CETA being a mixed agreement, it will be subject to provisional application (see above), meaning that areas of the agreement falling under EU-exclusive competence should enter into force after the European Parliament has ratified it, while the complete entry into force will happen only after ratification of the agreement by all member states’ national parliaments. However, as mentioned above, the twenty year rule does not apply in case of provisional application. It would only apply if the agreement has also been ratified by national parliaments - a process which normally takes a number of years i.e. almost certainly after Brexit.
Update November 2016
In October 2016 the Commission officially confirmed that the Investment Court System (ICS) and the investment protection provisions would not be subject to provisional application. This means that they will require the ratification of all EU member states and their relevant national and regional parliaments before coming into force.
Indeed, the Belgian government has promised to seek an opinion from the European Court of Justice on whether ICS is compatible with the EU treaties before the ratification.
As mentioned above, the EU-Korea agreement took over four years to be ratified by all EU governments, and that was in a much less complicated political context. Britain will probably have left the EU during this time. Furthermore, it is unlikely that Westminster will ratify CETA in the midst of our negotiations to leave the EU. Therefore, the UK will most likely never have to apply ICS and other investment provisions.
So whilst I acknowledge that this issue is very important to a lot of my constituents, I hope I have managed to explain why the claim by the NGO is not legally founded. After we leave the EU we will not be subject to CETA’s investment provisions for twenty years.