The Transatlantic Trade and Investment Partnership (TTIP) has been in the headlines this month, following a leak of classified documents. Some European officials have said the proposed deal, a massive free trade agreement between the United States and the European Union, is now in jeopardy. But what does this mean for the Comprehensive Economic and Trade Agreement (CETA), Canada’s own free trade agreement with the European Union? We asked Senior Fellow Patrick Leblond, an expert on CETA, to provide some insights.
CIGI: What are the key differences between CETA and the TTIP?
Patrick Leblond: For now, it is difficult to compare TTIP and CETA, because we do not really know what TTIP will look like, if it ever gets concluded, whereas we have a finalized and published agreement for CETA. Even the TTIP leaks that took place earlier this month are not very useful, because they are considered to be already out of date.
One key difference that may occur is with respect to financial services. CETA has a whole chapter concerning freer trade in financial services, explained in detail in my CIGI paper published in February, whereas the EU’s top negotiator announced last week that he would not be putting forward any market access offer in the areas of financial services in the TTIP negotiations until the European Union and the United States agreed on a deal on financial regulatory cooperation, which the United States has refused until now. So it looks likely that the financial services will be left out of TTIP.
Another potential difference between the two transatlantic agreements may be with respect to the investor-state dispute settlement (ISDS) provisions. Canada and the EU recently modified the CETA's investment chapter to give governments more control over the ISDS process than had been decided originally, following European concerns about potential abuses of the process by firms that are unhappy with certain regulatory decisions. For example, CETA will now lead to the creation of a permanent, as opposed to ad hoc, tribunal, with members named by the Canadian federal government and the European Commission, for deciding ISDS cases. The original provisions were in line with existing ISDS procedural standards, whereby an ad hoc tribunal or panel of arbitrators is named by both parties to the dispute, meaning the firm seeking compensation and the defending government.
Whether the US government is willing to go as far as CETA with TTIP remains to be seen. This could potentially be one of the areas where the negotiations fall through between the EU and the United States. Interestingly, EU concerns with regards to CETA’s ISDS provisions had more to do with establishing a precedent for TTIP. In other words, it seems that Europeans’ concerns for potential abuse of the ISDS system was more with respect to US firms than to Canadian firms, because the use of lawsuits if much more common in the United States. By setting the bar higher in CETA, Europeans hope to influence the TTIP negotiations. Whether they succeed is still up in the air. It will depend on the gains they make in other areas, like access to state-level government procurement markets.
CIGI: Do you think the recent leaks regarding the TTIP have harmed CETA’s chances of getting final approval?
Leblond: I doubt it. The leaks refer to an old text, which is no longer up to date. It is similar to what happened in the CETA context, whereby an early copy of the text was leaked. However, the leak was pretty much irrelevant because the information in the leaked text was outdated and there was no way to know what remained and what had changed, given the secret nature of the negotiations. In any event, to quote a European Union diplomat: "nothing is decided until everything is decided.” So even if the current text of the TTIP agreement were leaked, it would not necessarily matter much since it may not be a good reflection of what the final deal might look like.
In CETA’s case, the leak had little to no effect. It just gave a bit more fodder to those who were already against the agreement on principles, for example those who believe free trade is a bad thing. Furthermore, we recently saw that a lot can change rapidly, even at the very end, when the final version of the CETA agreement was announced at the end of February and we found out that the investment chapter had been significantly modified, especially with regards to the investor-state dispute settlement provisions.
Overall, would you say CETA is a win-win situation for Canada and the European Union?
Leblond: Yes, I think so. For Canada, assuming that it gets ratified, which it should be, CETA will mean a much freer, cheaper, access to the world's largest economy, after the United States. Who would not want that? Notwithstanding the aftermath of the recent economic crisis, the EU remains a rich and highly-developed economy that can afford to buy Canadian goods and services as well as invest in Canada. European firms are already the second largest investors in Canada after US firms. Moreover, EU businesses can provide us with high-quality goods -- think German machine-tools -- and services -- for example, design, architecture and large-scale engineering -- that can help make the Canadian economy more competitive, not only at home but also in other parts of the world, whether it is south of the border or on the other side of the Pacific.
For the European Union, easier access to Canadian markets is relatively less important, given that Canada represents around 2 percent of the European Union’s external trade. Nevertheless, in certain markets, like government contracts, the non-discriminatory access that European firms will have represents billions of dollars of potential new contracts, especially at a time when the federal government is committed to investing in infrastructure. For example, European firms have a lot of expertise and experience with green technologies, so the current government’s commitment to green infrastructure could provide some worthwhile opportunities for European environmental firms.
Another example of likely benefits for the EU is in the agrifood sector, whereby a lot of European food producers will see several of their geographical indicators -- things like Parma ham or Roquefort cheese -- protected in Canada. As result, they should be able to sell more to Canadian consumers, even more so in the cheese sector because of the increase in the tariff-free import quota.
The fact that European firms will be able to send their managers, professionals and technicians for longer periods of time, owing to special CETA visas, should contribute to making Canada a more attractive place to do business and invest.