By Adam Behsudi
8/14/14 6:27 PM EDT
The purported text of a nearly final trade agreement between the European Union and Canada could foreshadow how the deal might influence investment-related lawsuits, agricultural trade demands and other controversial issues being hashed out in separate negotiations between the EU and U.S.
The 521 PAGES OF TEXT521 PAGES OF TEXT leaked by the German television news show Tagesschau is only a portion of the almost 1,500-page final agreement. But experts say the Aug. 5 document provides a comprehensive view of what Canada and the EU will ultimately agree upon. The two sides reached a “deal in principle” last October but still had major differences on issues like investment rules.
“It is clear they are still negotiating, but they’ve been legally scrubbing this for a year and a half, and I’d be surprised if there is any skin left,” said Hosuk Lee-Makiyama, director of the European Center for International Political Economy, a Brussels-based think tank.
The final deal is unlikely to be ratified by the EU for another two years, however, as it makes its way around the EU’s 28 member states and ultimately to the European Parliament for final approval, Lee-Makiyama said. Canada’s provinces and Parliament also have to sign off on the pact.
The leaked text reveals how the EU and Canada have approached investment rules, specifically the inclusion of an investor-state dispute settlement (ISDS) mechanism that allows foreign investors to sue governments over regulations that they say harm their businesses.
Investor protections are one of the most scrutinized areas of the U.S.-EU talks. The EU is putting the issue to a special public consultation in response to backlash against inclusion of an investor-state dispute settlement mechanism in the trade deal.
The investor protections in the EU-Canada deal provide a good template for a U.S.-EU deal, said John Boscariol, head of the international trade and investment practice of Canadian law firm McCarthy Tetrault.
The deal is more limited than the investor protection rules in the North American Free Trade Agreement, with more specific definitions of what constitutes “fair and equitable treatment” and criteria for government expropriations, which would allow only legitimate cases to move forward, Boscariol said.
The agreement also prevents foreign companies from bringing lawsuits if they don’t meet domestic content and other government requirements for doing business or if they are denied access that country’s market for other reasons, he noted.
“This is pretty critical for a U.S. deal because it shows a deal can be reached between two developed and industrialized countries,” Boscariol said.
But Garry Neil, executive director of the public advocacy group Council of Canadians, said the investor protections in the Canada-EU deal could open municipalities and other public institutions to expensive lawsuits.
For instance, the text requires that the commercial use of a water source be subject to the terms of the agreement. That could mean a Canadian city that allows a private company to bottle its public water could be subject to litigation if it were to violate that commercial agreement through regulations.
“It narrows what sovereign nations can do in terms of regulation,” Neil said.
The fact that the EU has agreed on investor protections in the deal with Canada while conducting major consultations on the same issue in talks with the U.S. raises questions about the genuineness of those discussions with Washington, he said.
The EU-Canada agreement could also set a precedent on regulatory cooperation, which is a key area in the U.S. and EU talks. The text includes an annex on motor vehicle regulations that says mentions their “mutual interest in cooperation with the United States of America in the field of motor vehicle technical regulations.”
The leaked provisions set out a requirement that if the EU and U.S. conclude a future agreement that harmonizes certain auto regulation, then those should be implemented retroactively between the EU and Canada as well.
Canada also was able to establish an increase in tariff rate quotas on agricultural products like beef. That’s an area that the U.S. will likely want to see expanded as well in the proposed deal with the EU.
Currently, U.S. beef exporters can only take advantage of tariff-free entry to the EU under a shared 48,200 metric ton “high quality” beef quota that other countries, including Canada, also take part in.
Ottawa was able to secure duty-free treatment in its agreement with the EU for up to about 46,000 metric tons of fresh and frozen beef exports, which will be phased in over six years. In exchange, Canada granted the EU a 16,000 metric ton quota, also with a six-year phase-in.
Although Canada’s use of the shared high-quality beef quota has been limited, this year is the first since the quota’s enactment in 2009 that the limit could be maxed out by the nations involved, said Joe Schuele, communications director for the U.S. Meat Export Federation.
Last year, 86 percent of the quota was utilized, but that number is expected to climb now that Argentina has been granted access, he said. Meanwhile, the U.S. is the largest exporter of beef under the shared quota, shipping about 18,000 metric tons in 2013, Schuele said.