EU & Canada: Preparing to Sign Trade Pact

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The European Union and Canada are taking steps to ratify their trade pact, the Comprehensive Economic and Trade Agreement (CETA), which they completed in 2014 after six years of negotiations. The two sides plan to sign the agreement at a EU-Canada summit in October and then move to implementation, at least on a provisional basis. In July, the European Commission agreed to share the approval process with its member states in order to expedite the process. For Canada, only its national parliament needs to ratify the Agreement. This post considers the approval process and provisional implementation.

The EU contends that it has exclusive jurisdiction over CETA and other trade agreements and that the involvement of the member states should be limited to their representation on the Council of the EU, comprised of ministers from each EU country, and in the European Parliament. But that view is not shared by its members, which argue that in areas outside of the exclusive competence of the European Commission, such as investor-state protection, they have responsibilities, and thus a right to ratify a trade agreement, along with the EU. They contend that CETA is just such a “mixed agreement”.

The role of member states in ratifying trade agreement is a not a new issue. Currently, the European Commission and member states are litigating that issue before the European Court of Justice in a case, initiated by the Commission in 2014, relating to the 2012 EU-Singapore trade agreement. A decision in that case is not expected before 2017. While it will be specific to the Singapore trade pact, it could clarify the role of member states in the approval of trade agreements.

Rather than waiting for that decision, but without giving up its legal position, the European Commission, announced on July 5 that it was proposing CETA as a “mixed” agreement in order “[t]o allow for a swift signature and provisional application, so that the expected benefits are reaped without unnecessary delay”. Treating it as a mixed agreement means that with the approval of the Council and the consent of the European Parliament, the EU could implement, on a provisional basis, the trade accord, with the exception of elements that are considered within the jurisdiction of the member states. Only after ratification by national parliaments – and provincial parliaments in some federal states, could the trade accord be fully implemented. That process is expected to take several years.

Canada’s ratification process is simpler. Only the national parliament will need to ratify CETA. Its provinces and territories were involved in “an extensive consultation process” that enabled them to provide input into the development of Canada’s negotiating positions. However, CETA has prompted action by Canada’s provinces to expand the scope of their 1995 internal trade agreement – the Agreement on Internal Trade (AIT). According to The Economist (July 23, 2016), under CETA, Canada would offer European suppliers better access than provinces provide to each other’s firms, for example, in public procurement. As a consequence, Canada’s provincial trade ministers agreed on July 8 to revise the intergovernmental agreement to change it from a “positive list” approach, where only listed areas are liberalized, to a “negative list” where all trade among the provinces is opened unless it is listed.

Politico (Aug. 4, 2016) reported that Canada expects “the vast majority of CETA to be provisionally applied” early in 2017. According to Borderlex (July 14, 2016), the Slovak government, which began its six-month turn as President of the EU Council on July 1st, “has made clear that investment provisions of CETA will not be applied before all 28 member states ratify the deal.” The investment provisions were modified during the legal scrub of the trade pact.

Jean Heilman Grier

August 9, 2016

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