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CETA vote in European Parliament paves way for provisional entry into force

 

The European Parliament’s consent to the trade pact with Canada means CETA can come into force provisionally in the spring 2017. Yet a lengthy ratification process in member states still lies ahead.

 

The European Parliament gave its consent to the Comprehensive Economic and Trade Agreement with Canada on Wednesday 15 February 2017.

The move comes after a rocky political process in the EU ahead of CETA’s signature in November 2016 during which a regional government in Belgium almost scuppered the deal. 408 MEPs voted yes, 254 rejected CETA, and 33 MEPs abstained. Though the majority in favour of CETA is solid, the fact that one third of MEPs have rejected it indicates it remains controversial.

The vote clears the way for entry into force of the provisions in the deal – the bulk of them – which fall under the EU’s exclusive competence.

 

An emotional debate in Strasbourg

 

The vote was preceded by a highly charged debate in a plenary session in the premises of the European Parliament in Strasbourg, France.

During the discussions, trade commissioner Cecilia Malmström strongly defended the pact, insisting that “CETA is a progressive agreement with a progressive partner” and that its provisions would not affect regulatory freedom in the EU, nor impact its standards and regulatory requirements. Such concerns lie behind common criticisms of the deal.

A major controversy over the agreement’s investor protection provisions and the arbitration system – also known as ISDS – devised to resolve disputes between investors and host states induced Brussels and Ottawa to make changes to the text. In late 2015 they established a system of pre-appointed judges, also dubbed the Investment Court System or ICS.

Malmström insisted that the system was reformed thanks to the European Parliements, whose “role here has been critical in shaping the new ICS”.

The Commission’s trade chief also said: “I commit… to set in motion [a] review mechanism soon after CETA is provisionally applied and, to feed into this review, I intend to open a broad, inclusive debate on sustainable development provisions in our FTAs”.

“This trade deal is in many ways a golden standard for the world” said the MEP who acted as rapporteur for CETA, Artis Pabriks (EPP, Latvia). Pabriks presented today’s vote as a choice between protectionism and openness.

“The world is watching us, it is a unique chance for the EU to take a leading position in the global economy and global politics. Never before has the world needed a strong Europe as at this moment, and it needs guidelines for good trade, and CETA is this highlight”, Pabriks said.

S&D President Gianni Pittella said that his political group, the Socialists and Democrats, saw CETA “not as a model, but the beginning of a change in trade policy in the European Union”, and he praised the work accomplished by his group to many changes already achieved that, in his view, improve the deal.

“This agreement has taken on board people’s concerns”, said MEP Bernd Lange (S&D, Germany), the chair of the parliament’s trade committee. Lange qualified CETA as “a step in the right direction for globalisation”.

French and Belgian S&D MEPs opposed the deal. So did the Greens, as well as far left and far right groups.

For Yannick Jadot (Greens/EFA, France), with this vote the European legislature “plays into the hands of the extreme right and nationalist forces which are on the rise all over Europe”, benefitting “all those who want the EU to disintegrate and throw itself into the arms of foreign powers”.

Canada has greenlighted the deal earlier this month, which means that the interim application will enter into force as soon as the Council notifies Canada – which is not expected to happen before April 2017.

 

Provisional application – for how long?

 

A decision taken by the member states in the summer 2016 excludes from the scope of CETA’s provisional application provisions in the the deal’s investment chapter guaranteeing fair and equitable treatment, full protection and security, and protection against expropriation. The provisions on the investment court (ICS) are also kept out, and so are portfolio investment and related provisions from the financial services chapter, among others.

The elements falling under member states’ competences will now have to be ratified by some 38 national and regional parliaments in the EU. The process could take years.

A possible battle lies ahead as to what to do if one member state rejects CETA. Some member states, including Austria, Belgium, Germany and Poland have appended declarations in which they reserve the right to terminate CETA’s provisional application. Article 30.7(3)(c) of CETA was interpreted by some as an individual right for an opt-out. But the Commission had clarified that it was not allowed for member states to suspend provisional application unilaterally.

Germany and other member states consider that if a member state fails to ratify it, the provisional application will be terminated and CETA cancelled. This is a view, also endorsed by the German constitutional court, that could potentially clash with the Court of Justice of the EU in future.

The ratification process by member states could further be held up by a case in the European Court of Justice that is expected to be brought by the Belgian government concerning the compatibility of the ICS system with EU law. Observers also expect the German constitutional court in Karlsruhe to be called to rule on CETA.

Initiatives such as the petition for a referendum on “the Canadian version of TTIP” launched by a Dutch civil society platform could further hold up the process: a similar initiative by the same coalition had successfully challenged the approval of an association agreement with Ukraine.

 

Background

 

CETA negotiations started in 2009 and were concluded in 2014.

CETA will eliminate 99 percent of custom duties. It eliminates border barriers for nearly 92 percent of EU agricultural and food products. Both sides have maintained some restrictions and quotas on sensitive food products. These include beef, pork and sweetcorn for the EU, and dairy products for Canada. Canada has also agreed to protect 143 Geographical Indications (GIs). EU firms will be able to bid for public contracts at federal, provincial and municipal level.

A 2008 joint EU-Canada study estimated that the yearly real income gain from CETA could be would reach about  €11.6 bn for the EU and €8.2 bn for Canada after seven years of full implementation, with trade in services liberalisation playing a key role (50 percent of the total gains for the EU, 45.5 percent for Canada). EU exports to Canada are expected to increase by 24.3 percent, and Canadian exports to the EU by 20.6 percent.

A Commission 2011 Sustainability Impact Assessment expects the removal of barriers to trade in services play a key role in for the EU’s economic growth to be more important while Canada’s gains are expected to come mainly from the removal of tariffs. Half of EU’s benefits from CETA are expected to stem from increased trade in services.