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EU announces new ‘interpretation’ of Canada trade deal in bid to ensure ratification

The European Commission and Canada have agreed on the “interpretation” of parts of the Comprehensive Economic and Trade Agreement (CETA)

By: EBR - Posted: Monday, February 12, 2024

EU countries have previously expressed concern that the agreement, which provisionally entered into force in 2017, could effectively allow investors to sue member states if they impose more stringent environmental laws.
EU countries have previously expressed concern that the agreement, which provisionally entered into force in 2017, could effectively allow investors to sue member states if they impose more stringent environmental laws.

by Thomas Moller-Nielsen

The European Commission and Canada have agreed on the “interpretation” of parts of the Comprehensive Economic and Trade Agreement (CETA) that relate to investor protection from environmental regulation, in a push by Brussels to persuade member states to ratify the bilateral multibillion-euro deal.

EU countries have previously expressed concern that the agreement, which provisionally entered into force in 2017, could effectively allow investors to sue member states if they impose more stringent environmental laws.

Ten EU countries have still not ratified the tariff and custom duty-busting deal, which the Commission has described as “the most modern and advanced trade agreement ever made”.

“What we agreed is on [the] interpretation of certain provisions [that] aims to clarify the right to regulate for environmental purposes,” EU Trade Commissioner Valdis Dombrovskis said during a joint press conference with Canadian trade minister Mary Ng in Brussels on Friday (9 February).

“We are not changing the agreement through this, but we are providing [an] interpretation of certain provisions in that agreement, and that is important for some of our member states for the purposes of ratification of the agreement,” he added.

An EU official later elaborated that the desire for further clarity was initiated by Germany as it began its ratification process in 2022. The Bundestag ultimately approved the deal in December of that year.

The official added that in previous trade agreements the legal notion of “fair and equitable treatment” of foreign companies – a customary legal term in international trade deals – “has been in some cases interpreted in expansive ways by tribunals and we want to avoid that”.

The official also noted that Brussels and Ottawa had agreed “simplified, streamlined procedures” allowing small and medium-sized enterprises (SMEs) access to the investment court system – a significant development, given that an additional 2,500 European SMEs have begun exporting to Canada since CETA came into force.

The full details of the agreed interpretation were subsequently published on the Commission’s website late on Friday afternoon.

A deepening partnership

Despite the fact that not all of the provisions in CETA are currently in force, trade ties between the EU and Canada have significantly deepened since 2017.

The deal has already seen duties eliminated on 98% of all tariff lines, leading to a 66% surge in the bilateral trade in goods since 2016.

In total, European exports to Canada currently support 700,000 EU jobs – 70,000 more than before CETA provisionally entered into force.

EU trade with Canada has gained added significance in recent years, as the EU’s economic decoupling from Russia and “de-risking” from China have led it to seek alternative sources of energy and critical materials.

EU energy imports from Canada have surged 70% relative to 2016, while imports of minerals, base metals, and fertilisers have risen by 131%, 143%, and 225% respectively.

“CETA provided the EU with a solid, trusted source of supply for key resources such as energy and raw materials, at a critical moment at the wake of Russia’s war against Ukraine,” Dombrovskis noted during the press conference.

‘We have to keep up with the pace’

Dombrovkis also highlighted the importance of the deal being ratified both to reduce “uncertainty” and to allow it to be updated in future.

“Obviously it’s important to finalise the ratification process because the agreement [then] definitely enters into force and removes this uncertainty about the future of the agreement,” he said.

“The world is moving ahead and our agreement will have to keep up with the pace,” he added. “Correspondingly, it’s important to finalise the ratification of the agreement if we want to have any updates and modernisation of the agreement. It’s not imminent, it’s a relatively fresh agreement, but as the years go by [this] may become more relevant.”

*first published in: Euractiv.com

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