The real reason Europeans oppose CETA

Opposition to the trade deal with Canada is growing because of the controversial foreign investor protection system it contains

cetaNORTH YORK, Ont. Oct. 26, 2016/ Troy Media/ – Europeans have great affection for Canadians. Yet millions of Europeans oppose the Comprehensive Economic and Trade Agreement (CETA) between Canada and Europe. Why?

Some commentators suggest it’s because of pettiness or internal squabbling in Belgium. Those claims are wrong.

The real reason is that many people in Europe have learned about parts of CETA that have little to do with trade and decided to oppose them.

Time and again, in countries where almost no one had heard of CETA, public opinion shifted suddenly. The recent opposition in the Belgian region of Wallonia is just the latest example.

For those who have watched these events unfold over the last two years, the leading reason for European opposition is clear. CETA would expand a controversial foreign investor protection system known as “investor-state dispute settlement” (ISDS) or the “investment court system” (ICS).

A similar system to protect foreign investors is found in other trade agreements, led by the North American Free Trade Agreement (NAFTA). Canada’s acceptance of ISDS in NAFTA remains unique among developed countries, even two decades later. ISDS is also prevalent in over 2,000 bilateral investment treaties, but in a context where it primarily disciplines developing and transition countries.

CETA would greatly expand the existing foreign investor protection system. Combined with the proposed Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP), it would apply ISDS comprehensively among developed countries. Put differently, a few new massive trade deals would turn ISDS into an immutable global institution.

ISDS is controversial for four reasons:

  • It gives powerful rights to foreign investors, without corresponding responsibilities.
  • It creates potentially massive financial risks for democratic regulation.
  • It allows foreign investors to sidestep courts.
  • And it compromises judicial independence and fair process, despite improvements on this point agreed earlier this year between the Liberal government of Justin Trudeau and the Europeans.

Millions of Europeans have rejected ISDS in remarkably strong terms, most notably in Austria, Belgium, Germany, Hungary, the Netherlands, Poland, Romania and Slovenia. Many have seen through claims by ISDS lawyers and the European Commission – carried widely in European media – that ISDS only protects foreign investors from discrimination and expropriation, or that it does not interfere with democratic law-making. These claims are misleading, to put it mildly.

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In response to the public outcry, European officials and Canadian Trade Minister Chrystia Freeland took significant, though incomplete, steps to limit the widespread conflicts of interest in ISDS. As an example of the incompleteness of these steps, the reformed CETA would still allow tribunal members – who would decide foreign investor claims against countries – to be appointed and paid lucratively by foreign investors in separate ISDS cases under other treaties, some of which we know take place in secret. Tribunal members’ remuneration would also depend significantly on the frequency of claims by foreign investors. Both aspects are incompatible with judicial independence.

In negotiating and then rushing to finalize the CETA text, the former Conservative government of Stephen Harper acted as a champion of ISDS. That government accepted ISDS in the proposed TPP and Canada’s terrible Foreign Investment Promotion and Protection Agreement (FIPA) with China. The latter was finalized by the Harper government in 2014 and will apply to Canada until at least 2045.

Harper’s affection for ISDS may be explained by the interests of Canada’s resource industry. Canadian mining companies have used ISDS to pressure countries that were considering limits on resource projects, such as in the troubling story of Gabriel Resources’ proposed Rosia Montana mine in Romania.

Faced with the political time bomb of ISDS, Freeland has for a year tried to defuse its problems before public opposition drove European governments away from CETA. In the meantime, opposition to ISDS spread to Belgium, prompting a well-informed debate in the Wallonian parliament, the current stand by the Wallonian government, and Belgium’s inability to accept a recent weak interpretive declaration accepted by other European governments.

Meanwhile, opposition to ISDS in Europe will probably keep growing. The contradiction between democracy and the rule of law, on one hand, and foreign investor protection, on the other, is too stark. I doubt CETA will be finalized for months, possibly years.

ISDS has changed the politics of “free trade” for Europeans. If more Canadians knew about ISDS, they would think twice, too. I expect most would be amazed – and very concerned.

Gus Van Harten is a professor at Osgoode Hall Law School and the author of [popup url=”http://amzn.to/2eRzHYE” height=”1000″ width=”1200″ scrollbars=”1″] Sold Down the Yangtze: Canada’s Lopsided Investment Deal with China[/popup] (Lorimer).

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