BRITISH COMPANY BOARDS will have another Brexit-related issue to consider now that the European Union (EU) has approved the controversial Comprehensive Economic Trade Agreement (CETA) with Canada.
Will it apply in Britain once the UK quits the EU? And how much of the deal will apply, provisionally, in the meantime? After a week of high political drama in Belgium, CETA is back on track for implementation.
Belgium’s regional governments for Wallonia and Brussels are now on board with the trade agreement, with the European Union (EU) Council of Ministers and the European Parliament provisionally agreeing to the deal.
Its full entry into force will only happen, however, once Canada and all 28 EU member states have ratified its terms, which could take three or four years.
And this is where things get (even more) complicated. CETA is a ground-breaking trade agreement because it goes much further than the usual trade deal territory of cutting tariffs and getting rid of restrictive import quotas.
CETA’s far-flung promises
CETA includes commitments on regulatory issues such as labour mobility, freedom to provide services, intellectual property rights (IPR), government procurement obligations and – crucially – the right of companies to be compensated for government decisions that damage their investments.
It is unclear, even unlikely, that a provisional application of CETA will cover all these policy areas.
It was the investment protection issue that had so upset the Walloons and Bruxellois, to the point of almost torpedoing the agreement. And they were mollified only by talk from EU ministers and the commission that the EU will only provisionally implement those parts of the agreement that are under the EU’s exclusive control under the Treaty of European Union.
Definitely set for inclusion are cutting tariffs and import quotas (still an important part of CETA), but it would exclude the investment protection rules, and potentially other sections.
Ultimately, these other ‘national’ jurisdictions might only be implemented if member states accept these parts of the deal through their ratification processes.
Right to object
Unfortunately, the CETA text itself does not clearly flag what can be applied provisionally and what cannot – it merely gives the parties (the EU and Canada) the right to say what they will implement provisionally – giving the other side the right to object.
There is EU legislation on services, IPR, and public procurement – so maybe these parts of the deal will be implemented quickly and provisionally, following a EU Council of Ministers and European Parliament vote – but maybe not.
Ultimately, a CETA implementation could see the investor protection rules being ignored in some member states, notably in Belgium.
A commission spokesperson, speaking at the daily press briefing in Brussels on Friday (October 28) stressed that EU member states had originally authorised the commission to negotiate a deep deal that strayed into policy areas controlled by national governments. But maybe the potential pitfalls of having the EU negotiate over policies it has no authority to amend was not thought through: “There are issues when we come to the step of ratification that need to be addressed,” the spokesperson admitted.
Certainly Canada, while relieved CETA has not been killed by the Walloons and Bruxellois, knows the deal is far from being implemented, even provisionally. Its international trade minister Chrystia Freeland warned: “There are still many steps to be taken…Even after signing, the process will not yet be complete.”
Bi-lateral option for Britain
And then there is Brexit. Should Britain invoke Article 50 of the Treaty of European Union and quit the bloc within two years, there is every chance much of CETA will be implemented provisionally when the UK leaves, (but much less chance of full ratification).
Once it quits the EU, Britain will lose access to EU trade agreements, and it will be up to the EUs trade deal partners whether they will allow Britain to continue benefiting from these deals’ terms bilaterally. That would apply to CETA and Canada too. It’s an issue under consideration in Ottawa and London for sure – but first the UK and Canadian governments will want to see if CETA actually gets implemented.
Keith Nuthall is a freelance journalist