CETA Explained: A Triumph of Free Trade or a Setback for Europe

By Shane Goodman

On 30th October 2016, Canadian Prime Minister Justin Trudeau travelled to Brussels to sign the Comprehensive Economic and Trade Agreement (CETA) on behalf of his government. CETA is a free-trade deal between the European Union and Canada which its proponents claim will lead to job creation, economic growth and a reduction in red tape. However, critics of the agreement claim that it will lead to a weakening of European sovereignty and that it will have an extremely detrimental environmental impact. 

Bilateral negotiations between the EU and Canada began in October 2009 and were concluded after almost five years in August 2014. One aspect of CETA which has led to much confusion is its provisional application as of September 2017, following which 98% of the trade tariffs between Canada and the EU have already been removed. However, as CETA is a mixed agreement, the ‘trade’ aspects are dealt with separately to the ‘investment protection’ elements. Consequently, all EU Member States must first ratify the agreement for it to take full effect. Whilst all Member States have approved the text of the agreement for signature, only 16 Union members have ratified the trade deal. Among them are Spain, Portugal and the three Baltic. On the other hand, major European powers such as Germany and France have yet to ratify the agreement, although it has passed the French National Assembly in 2019 and is waiting on approval from the Senate. While most Member States are expected to pass the necessary legislation to enact CETA, the Cypriot government rejected the deal on 31st July 2020, which has presented a new hurdle for the deal to overcome. Citing the lack of a geographic indication for halloumi cheese as the most significant problem with the agreement, the concern in Cyprus over a possible weakening of European intellectual property rights has also been echoed by opposition parties in the Netherlands and Italy. Still, experts do not expect this to be fatal to the trade agreement and believe that this will at most lead to minor renegotiations around the issue of geographic indications of food products. 

Despite these problems, CETA can still count on the support of the Canadian and various European governments. For Canada and the EU, the trade agreement marks a substantial loosening of trade barriers and increased cooperation.The EU is the second-largest market for Canadian exports after the United States, with 21.4% of Canadian foreign direct investment (FDI) going to the European market. Conversely, Canada, while still a significant market for European exports accounted for only 2% of all European external trade in 2018.

However, the deal is not without its critics. Legal standing is de facto granted only to those with large amounts of capital, such as multinational corporations. Under the new corporate-focused multilateral investment tribunal, a European government, for example, would be likely to lose a case where they may attempt to put cigarettes in plain packaging if a Canadian corporation could prove that it caused them a competitive disadvantage. Indeed, the Canadian government themselves has lost cases concerning food safety and the banning of carcinogenic chemicals in petrol under similar provisions in the North American Free Trade Agreement (NAFTA).

Perhaps the area of most concern to critics of CETA is the potential of the deal having an extremely detrimental impact on the environment. Tar sands oil, such as that which would have been extracted through the Keystone pipeline had it been constructed, is one of the most damaging fossil fuels available for burning. Much of this oil is extracted in Alberta, Canada and while tar sands oil is rarely found in Europe, proposed legislation to ban its import into Europe was blocked by the Canadian government using CETA as a political bargaining chip. More than half of the cases brought before special tribunals similar to CETA’s multilateral investment tribunal have been concerning environmental regulations. Additionally, there is concern that the European Green Deal goals could be severely undermined by non-European corporations through CETA mechanisms. In fact, non-Canadian corporations such as those based in the US would also have standing in this system of legal redress so long as they have a Canadian subsidiary, something that is quite commonly held by large companies in the United States. This would be highly concerning to Member States with high levels of FDI from the US such as Ireland and Germany.

To conclude, CETA remains a divisive topic over ten years after negotiations commenced. While it cannot be denied that the free trade agreement will make exporting easier, one must consider if the impact to the integrity of the rule of law and the environment would truly make this agreement a wise investment into Europe’s future.