On the occasion of the fifth anniversary of the provisional application of CETA, the trade agreement between the EU and Canada, Giuseppe Bongiovanni takes stock of the situation and the results achieved.

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di Giuseppe Bongiovanni
Trainee Lawyer, Bocconi School of Law, Master in Diplomatic Studies

 

Three years ago, the Court of Justice of the European Union (Full Court) gave its green light to the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and its Member States. Specifically, it concluded that provisions on the resolution of investment disputes between investors and States (Chapter Eight – Section F) were compatible with EU primary law. The ratification procedure of CETA is ongoing, with the approval of 11 Member States still pending. The table below summarises the current situation:

 

Country	Ratification Status	Notification	Surplus / deficit in goods trade with Canada in 2020 (million €)
Austria	Ratified	23 May 2019	+ 932
Belgium	Pending		- 55
Bulgaria	Pending		- 31
Croatia	Ratified	9 November 2017	+ 68
Cyprus	Rejected*		- 7
Czechia	Ratified	16 November 2017	+ 54
Denmark	Ratified	1 June 2017	+ 530
Estonia	Ratified	10 November 2017	+ 46
Finland	Ratified	3 January 2019	+ 48
France	Pending**		+ 409
Germany	Pending		+ 4850 (#1)
Greece	Pending		+ 109
Hungary	Pending		+ 156
Ireland	Pending		+ 1220 (#3)
Italy	Pending		+ 2520 (#2)
Latvia	Ratified	9 March 2017	- 238
Lithuania	Ratified	17 May 2018	+ 100
Luxembourg	Ratified	10 June 2020	+ 11
Malta	Ratified	26 July 2017	- 130
Netherlands	Ratified	12 July 2022	+ 218
Poland	Pending		+ 777
Portugal	Ratified	31 January 2018	+ 179
Romania	Ratified	2 December 2020	+ 18
Slovakia	Ratified	28 November 2019	+ 162
Slovenia	Pending		+ 74
Spain	Ratified	13 December 2017	+ 665
Sweden	Ratified	9 October 2018	+ 619

 

Source

• Council of the European Union
• Jean Monnet Network on Transatlantic Trade Politics
• Eurostat

* The Cypriot Parliament voted against ratification on 31 July 2020.
** The Assemblée nationale (lower House) ratified the agreement in July 2019, but the Sénat (upper House) has not ratified the agreement yet.

After a brief introduction on CETA, this article will outline the difficulties encountered by CETA in Belgium and the current political debate in certain EU Member States.

The negotiations

On 4 June 2007, at their annual summit in Berlin, EU and Canadian leaders decided to cooperate on a new study to examine and assess the costs and benefits of a closer economic partnership. The leaders also agreed to review this joint study on 17 October 2008 at the EU-Canada summit in Montreal, to pursue balanced and closer future EU-Canada economic integration. The purpose of the economic study, commissioned to the Foreign Affairs and International Trade Department of the Government of Canada and to the DG Trade of the European Commission, was to examine the existing barriers to trade between Canada and the European bloc, especially non-tariff barriers. The study concluded that there was a consensus amongst EU nationals that a closer economic relationship with Canada was attractive, and that Canadian nationals believed that bilateral relations with the EU had not reached their full potential.

EU and Canadian leaders then agreed to work together to “define the scope of a deepened economic agreement” which had to establish the critical point for a successful conclusion, taking into due consideration the role of Canada’s provinces and territories and EU Member States in their areas of competence. It was then at the EU-Canada summit in Prague on 6 May 2009 that the launch of negotiations was officially announced and CETA negotiations effectively started in October 2009.

Following four years of intense negotiations, on 18 October 2013 the President of the EU Commission – José Manuel Barroso – and Canadian Prime Minister Stephen Harper reached a political breakthrough by signing an agreement in principle on some of the most important elements of CETA: i) elimination of all industrial tariffs and almost all agricultural tariffs; ii) new provisions on investment, public procurement, regulatory cooperation and temporary movement of workers, making CETA the living example of a new generation of free trade agreements; iii) commitments by Canada to open public procurement to European bidders not only at a federal level but also within provinces and territories; iv) further protection of intellectual property rights and the EU’s flagship agricultural products (e.g., PDO, PGI and TSG).

Negotiations were officially concluded on 1 August 2014 and two weeks later the German public television station ARD’s programme Tagesschau leaked the first 521 pages of the agreement; the consolidated text of the agreement was then published by the EU at the end of September. It was only almost three years later, on 15 February 2017, that the European Parliament approved CETA by 408 votes to 254, with 33 abstentions.

Entry into force

With regards to the EU’s legal system, CETA is a “mixed agreement”, i.e., an agreement between the EU and a third country that touches both on competences exclusive to the EU and on those exclusive to EU Member States. Agreements of this kind must be approved by both the EU and by all Member States. At first, the EU Commission tried to present CETA as an exclusive agreement – thus avoiding the need of national ratifications – but its view was opposed by certain Member States within the EU Council. The Commission changed its approach and the 2011 updated version of the “Recommendation from the Commission to the Council on the modification of the negotiating directives [...] to negotiate [...] on investment”, eventually refers to investment as an area of “mixed competence”, thus acknowledging the mixity of the agreement.

Article 30.7(3) CETA allows for the possibility of the provisional application of the Agreement, therefore on 5 October 2016 the Council adopted a decision according to which CETA would apply on a provisional basis within the Union. While specifying that in accordance with Article 30.6(1) CETA the Agreement did not confer rights or obligations that can be directly invoked before EU or Member States’ courts, Council Decision (EU) 2017/38 provided for the provisional application of nearly the whole treaty, exception being made for those provisions that did not fall under the EU’s exclusive competence.

In detail, only a few provisions of Chapter Eight on investment benefitted from provisional application: these include Articles 8.1 to 8.8 on definitions, scope, market access, national and most-favoured-nation treatment, those on reservations and exceptions and on denial of benefits. Moreover, those provisions of Chapter Thirteen on financial services that concerned portfolio investment, protections of investment and investor-State dispute resolution were not to enjoy provisional application, since they did not fall within the Union’s exclusive competence. Besides these and other minor exceptions, almost the remaining totality of CETA was given green light for provisional application.

It was then on 21 September 2017 that CETA effectively entered into force provisionally. Welcoming this milestone in the EU’s trade policy, EU Commission President Juncker stated that: “This agreement encapsulates what we want our trade policy to be – an instrument for growth that benefits European companies and citizens, but also a tool to project our values, harness globalisation and shape global trade rules”. CETA will enter into force in its entirety only when all parties will have completed their internal constitutional ratification procedures.

Belgium and the JII

At the beginning of October 2016, the month of CETA’s planned signing, Belgium announced that it was not able to sign the agreement since assent was required by all regional governments. In particular, the Walloon Region – one of the three Regions of Belgium alongside Flanders and Brussels – led by centre-left Prime Minister Paul Magnette, rejected the treaty; it was then followed by the Region of Brussels, which saw it as over-protective for foreign multinational firms. On 13 October, Canadian vice-Minister David Lametti even defended CETA before a Walloon parliament committee, half trying to persuade it to give its consent, half warning it of the potential consequences of a refusal. However, the following day the parliament voted by a large majority of 46 to 16 to reject CETA.

Since the rejection by Wallonia was compromising the signing of the agreement, the EU and Canada negotiated a Joint Interpretative Instrument (JII), to address the concerns related to the most contested provisions of CETA – namely those on investment protection. The JII, which was then signed on the same day as CETA itself, provides, in line with Article 31 of the Vienna Convention on the Law of Treaties, a clear and precise statement of what the EU and Canada agreed in certain CETA provisions that had been the object of public debate.

For example, the JII clarified that CETA preserves the ability of both EU and Canada to pass their own laws regulating economic activities in the public interest and to achieve legitimate public policy objectives such as public health, environmental protection, and the promotion of cultural diversity. Since it is a very sensitive issue on which public opinion greatly focused, the JII also entered into great detail on investment protection provisions, acknowledging that while CETA ensures a high level of protection for investments and provides for a new and transparent dispute resolution mechanism, it will not result in foreign investors (i.e., Canadian investors; the JII is a joint declaration, but it was issued to mitigate the concerns of some Europeans) being treated more favourably than domestic investors.

The JII also stated that CETA requires a real economic link with the economies of the territories in order for a firm to benefit from the agreement, hence preventing “shell companies” being established by investors of third countries to benefit from the Investment Court System. Finally, the JII also clarified some contentious aspects related to labour and environmental protection, government procurement and benefits for SMEs. Canada also seized the opportunity to reassert its commitment to an active engagement with its aboriginal peoples to ensure that the ongoing implementation of CETA reflected their interests.

Once all concerns had been cleared, the Walloon Parliament passed a motion authorising the Belgian government in the person of Foreign Affairs Minister Didier Reynders to proceed with the signing of the agreement, but as of today the ratification process is stalled.

Where we are today

• Cyprus

On 31st July 2020, Cyprus’ House of Representatives – Cyprus has a presidential system with a unicameral parliament – rejected CETA with 37 votes against and 18 votes in favour, but the government of President Nicos Anastasiades did not formally notify the European Union of the vote’s outcome. Instead, it tried to reschedule a new vote at a later date, after the May 2021 elections, but it failed doing so due to the lack of parliamentary majority.

Opponents of CETA mainly represent the agricultural sector and one divisive issue has indeed been the recognition of Halloumi cheese. Central to the concerns of the Cypriot parties which voted against ratification was the lack of a geographical indication for halloumi, which however is a matter of EU policy unrelated to CETA per se. Critics also argue that CETA will create a “parallel justice system” through the implementation of investor-State dispute settlement provisions, perhaps the most common criticism raised against CETA.

Please note that the President of the Republic still has the authority to bring the agreement back for reconsideration by the House.

• Italy

Provisions on investment set by CETA (e.g., investment protection, portfolio investment, investment dispute resolution, financial services provisions concerning portfolio investment, and ISDS) make it necessary for the Italian Parliament – both the Chamber of Representatives and the Senate – to authorise ratification, as provided for by Art. 80 of the Italian Constitution. On 13 June 2017, ratification procedures started in the Senate Foreign Affairs Committee (President Casini, Rapporteur Sangalli), but they were then halted due to increasing public concerns. Those opposing CETA focus on specialty foods and the beef sector, arguing that CETA will undermine prices for Italian farmers and that the increased import of agricultural products will harm food standards and safety. Opponents include the Italian General Confederation of Labour (CGIL), Slow Food Italy, and Fairwatch.

However, criticism seems largely ill-founded, as no Canadian product can enter the EU market if it does not comply with EU standards (and vice versa). Moreover, CETA is widely approved by Italian businesses, with the Italian Farmers Union (CIA) having recently asked the Government to prioritise ratification.

After the general elections of March 2018, chances for ratification worsened, with the League and the Five Stars Movement – both critics of the agreement – forming a government together. In a bilateral meeting during the G7 reunion in Cornwall, June 2021, Prime Minister Trudeau encouraged Prime Minister Draghi to ratify the agreement as soon as possible. Were the centre-right coalition to win the upcoming elections, it is unlikely that Italy will ratify the agreement in the near future.

• France

As anticipated, the Assemblée Nationale (lower House) voted in favour of ratification on 23 July 2019, with a 266 against 213 majority vote. The agreement was supported by the governing party of President Macron, La République En Marche, but 52 party members abstained and 9 voted against the ratification. The Sénat (upper House), which also has to vote its approval, is yet to vote and is now controlled (41,6%) by the right-wing Republican Party, which is sceptical about the agreement.

• Germany

After giving a first green light to the Government in October 2016, required to sign CETA, Germany’s Federal Constitutional Court has recently issued another decisive ruling. On 15 March 2022 the Bundesverfassungsgericht announced its decision on several constitutional complaints against CETA, including a citizens' complaint initiated by foodwatch – a consumer association – together with Mehr Demokratie and Campact. The Court ruled that CETA is constitutional in its provisional application. It goes beyond the scope of this article to analyse the legal aspects of the ruling, but surely it will be interesting to see whether this second confirmation will speed up ratification procedures in Germany.

Conclusion

In their joint statement of 23 March 2022, EU Commission President von der Leyen and Prime Minister Trudeau stated that “they look forward to full ratification” of CETA. However, considering the 11 Member States still missing on the roll call, it is highly unlikely that CETA will enjoy full ratification in the near future. If one adds the difficulties created by the pandemic and the ongoing war in Ukraine, massive changes in national politics will be needed to conclude the procedure within the year.

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Cover photo source: repubblica.it

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