Canada is an important trading partner of the European Union, and within the EU Canada's highest volume of trade is with the UK.
The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada is a fantastic deal in terms of the access European firms will get to Canadian markets. CETA will eliminate virtually all tariffs, and for the first time Canada has opened up its government contracts at the province and city levels. Both will create more opportunities for British businesses to export even more goods and services to Canada.
This deal will also mean a reduction in time-consuming paperwork for our exporters. Scotch Whisky, for example, which already accounts for 20% of UK exports to Canada and supports 40,000 jobs across the UK, will benefit from fewer local legal restrictions and the removal of costly red tape. The Scotch Whisky Association has therefore called CETA “an important deal for UK distillers”. As a growing market for quality Scottish products, I hope increased trade with Canada can help protect and create jobs in Scotland, particularly for small and medium-sized enterprises.
Citizens have raised concerns throughout the process and the European social democrats have responded quickly and effectively, securing unprecedented changes to the text of the agreement. Through what is called a ‘joint interpretative instrument’ agreed by both the EU and Canada, we have solid legal guarantees on issues that are important to British voters, like the NHS, workers’ rights and the environment. We have made it clear that international trade should not cause a race to the bottom, and this agreement respects this and reinforces current high standards
We also successfully fought for the removal of the toxic Investor-State-Dispute-Settlement (ISDS), which had led to some damaging court cases against legitimate government decisions around the world. In its place there is a new transparent public court staffed by well-qualified judges who must adhere to a strict code of conduct. Governments must be free to regulate in the best interests of their citizens. This new court guarantees this right, whilst encouraging investment.
In many ways the centre-left group in the parliament has been a victim of its own successes with CETA. Looking back at our unprecedented achievements, some believe that we could and should try to push for even more. Although I have some sympathy with this position, I am convinced that now is the time ratify this deal. CETA is the most progressive trade deal ever negotiated and we should celebrate our successes.
The Canadians share most of our dearest values and CETA should be seen as a way of strengthening our bilateral relationship on a progressive basis, whilst providing important economic opportunities for Scotland. Furthermore, political events across the Atlantic demand that the EU takes a lead now on trade issues.
We are entering a new era for global trade. Faced with unfettered globalisation on the one hand and Trump-style protectionism on the other, modern trade agreements like CETA can help set progressive global rules.
The European Parliament today gave the green light to the Comprehensive Economic Trade Agreement (CETA), paving the way for its provisional application.
1. Benefits for the many and not just the few
CETA is an ambitious trade agreement which reduces almost all tariffs across the board, offering significant opportunities for European businesses and their workers in a number of key sectors for employment. Although most economic studies show modest increases in GDP, CETA fits into the EU’s broader trade policy as an important signpost of trade openness and economic development.
The impressive market opening is backed up by a strong sustainable development chapter, which aims to make sure these benefits are not gained at the expense of citizens or the environment. Alas, a trade deal on its own cannot ensure the benefits are shared fairly. International trade policy must be flanked with progressive domestic policies e.g. in training, education as well as fiscal measures.
2. Values-based policy
Canada and the EU already share common values including democracy, the rule of law, equality and strong commitment on the international scene to guaranteeing peace and welcoming refugees.
CETA’s sustainable development chapter includes binding commitments on the core ILO conventions and multilateral environmental agreements like the Paris climate agreement. It also forbids partners from lowering environmental and social standards in order to gain a competitive advantage. So no race to the bottom. Instead, the conditions are set and the incentives are there for a race to the top between two partners whose standards are already very high.
It is enforceable through an ad hoc dispute settlement mechanism which, in its current form, does not allow for the imposition of sanctions. Nevertheless, the S&D group obtained an important commitment from Canada and the Commission to review the ad hoc dispute settlement mechanism with a view to making the enforceability of the trade and sustainable development chapter more effective.
3. Transparency and citizen involvement
Civil society and S&D pressure during the TTIP negotiations in particular has led to a fundamental change in the transparency of EU trade negotiations. It is true that CETA negotiations were not as transparent as TTIP.
Nevertheless, MEPs have been closely involved in the CETA process: negotiating documents were sent to the MEPs working on the file, and members of the INTA committee were briefed after each round. Furthermore, since the beginning of negotiations CETA has been discussed in the international trade committee at least thirty times, including with a wide range of stakeholders and civil society.
4. No-one left behind
There are winners and losers of any trade policy. This is true whether you make a deal or choose not to, because the world will not stop changing just because Europe does. We believe that in CETA’s case there will be mostly winners, but it is true that there will be some displacement of jobs within the EU. We S&Ds continue to push for expansion of the Globalisation Adjustment Fund, as well as well-funded programmes at the national level in our respective countries to properly compensate people who lose their job as a result of international trade.
5. SMEs as key players
Unlike the proposed TTIP, CETA unfortunately does not have a specific chapter for small and medium-sized enterprises (SMEs). However, the focus in modern trade agreements like CETA on ‘non-tariff barriers’ (ie. paperwork, testing, local restrictions) will benefit smaller companies more. As we know, bigger companies have the capacity to overcome these technical hurdles to trade already, including armies of lawyers and local specialists that SMEs just don’t have access to.
6. Multilateralism as the first best option
We acknowledge that talks in the WTO have stalled in some crucial areas, and that although that is the best option, bilateral trade agreements are second best. The current times we are living in demand that the EU takes a lead on world trade. CETA would be an excellent statement of openness whilst other partners are turning in on themselves. At the same time, the EU remains fully committed to the multilateral trading system.
7. Governments free to legislate in the public interest
The ‘right to regulate’ is enshrined in CETA, both in the text of the agreement and - for the avoidance of any doubt - in the joint interpretative instrument agreed by the EU and Canada. Both partners retain the right, and indeed are encouraged, to implement high social and environmental standards that protect citizens and our planet.
8. Protection of public services
Like all EU trade agreements, public services enjoy a blanket exemption through reservations similar to those of the WTO’s General Agreement on Trade in Services (GATS). Governments are free to provide services like health and education as they wish, including maintaining public monopolies or granting exclusive rights to private operators. These EU-wide exemptions from liberalisation also allow governments to take services back into public hands from the commercial sector.
9. Human and social rights at the heart of trade policy
Apart from provisions on labour rights and environmental protection CETA also contains commitments to support corporate social responsibility, such as those in the OECD Guidelines for Multinational Enterprises.
Canada and the EU have also signed a strategic partnership agreement to go alongside the treaty which allows for a termination of CETA should a substantial violation of human rights occur. This will be ratified by the European Parliament with CETA on February 15, 2017.
10. EU standards must be preserved
There is nothing in CETA which alters the EU legislative process when it comes to issues like GMOs, hormones in beef, endocrine disruptors, fuel quality cyanide in paints or anything else. The precautionary principle is safeguarded in the treaty and all proposals to alter EU legislation must go through the normal democratic process.
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. It 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 issues 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 entry has been edited to remove an incorrect reference to tar sands oil and fracking.
1. Benefits for the many and not just the few
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.
In a recent mass-email directed at me from an anti-CETA campaign group it is asserted that:
“The official study of CETA estimates that it will add 0.01% per year (0.08% after seven years) to EU GDP. A UN study finds that CETA will result in reduced economic growth in the EU, job losses and a dangerous reduction in intra-EU trade.”
My decision to vote against sending the Investment Court System in CETA to the European Court of Justice has been questioned by some groups. The motion failed to gain support across the parliament and was rejected by 419 votes to 258 votes, with 22 abstentions. Below is an explanation of the motion and the reasoning behind my vote.
On Wednesday 23 November 2016 a draft resolution came before the plenary session of the European Parliament in Strasbourg. It requested that the parliament seek a legal opinion from the European Court of Justice on the compatibility with EU law of the provisions of CETA related to investment dispute settlement – the so called investment court system (ICS).
According to Rule 108 (6) of the parliament’s procedures if this resolution had been approved, the vote on the CETA agreement would have been put on hold until the Court delivered its opinion, which takes around two years.
Why I voted against the resolution
- I agree that it is in everybody’s interest that we have legal certainty over aspects of the CETA agreement. Our Socialists and Democrats (S&D) group, to which Labour MEPs belong, took the initiative and requested an opinion in March 2016 from the European Parliament’s legal service on the compatibility of the whole investment chapter with the EU treaties. This legal analysis concluded that the investment chapter is indeed compatible with existing EU law. The EP legal service is an impartial and non-partisan service open to all MEPs from all parties. We usually trust their judgement, and this should also be the case even when people disagree with their verdict. You can read their full analysis here.
- There is already a legal statement of Belgium attached to the CETA text that commits Belgium to ask the European Court of Justice for an opinion on the compatibility of ICS with EU law. Belgium has apparently already started drafting this request and the European Parliament could contribute to this process. In the meantime ICS will not be applied.
- The EU Council - made up of EU government leaders - decided to exclude parts of the investment protection provisions and the whole of ICS from the ‘provisional application’ of CETA. The Canadian government, the European Commission and the Council have committed to continue the technical work on ICS so that it conforms to our social-democratic principles as outlined in our position paper from March 2015. We have therefore an interest not to stop the process now with a referral to the European Court of Justice but let it continue and allow the Belgian government to seek the opinion of the Court before their ratification. You can read more on provisional application and what it means on my blog here.
Although I acknowledge some colleagues’ desire for greater legal certainty, the majority of the text does not pose any legal issues. Some MEPs from other groups were using this resolution as a political tool to try and frustrate CETA for an extra two years.
The social-democrats in the European Parliament have achieved so much in the seven years we have been working on CETA when it comes to respect for core labour standards, the protection of public services, the upholding of consumer standards, and not least the removal of the system of private arbitration (ISDS).
CETA may stagger over the line, but will the price be the slow death of EU trade policy? This week’s hurried addition of declarations - still not public - have cluttered the deal and damaged the democratic process, with possibly devastating implications for our credibility as an international economic actor.