Multilateral Mishap

German Complaints Over Investor Rights Claims May Delay EU-Canada Deal Signing

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Protests in Ontario in Canada against the free trade agreement.
  • Why it matters

    Why it matters

    The two sides have been negotiating a trade deal for five years, but just a month before it is due to be signed, Germany appears to be getting cold feet. A failed deal will derail a significant trade agreement between the United States and Europe.

  • Facts

    Facts

    • The European Union and Canada have been negotiating a free trade agreement since 2009.
    • The deal is supposed to be signed in September, but Germany has registered last minute complaints.
    • Canada is a more important trading partner to the European Union overall than it is to Germany.
  • Audio

    Audio

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A German diplomat in Brussels said the whole situation needs clarification. Germany will only sign the treaty, which is due to be ratified in September, if it is modified.

Canada and the European Union have been negotiating the Comprehensive Economic and Trade Agreement, known as CETA, since 2009, with the aim of removing barriers to trade between the two entities. The European Union says the planned treaty will remove 99 percent of tariffs between the two economies.

The deal is as important to Canada as it is to the 28-member European group, as the European Union is Canada’s second most important trading partner after the United States, accounting for just under 10 percent of its external trade. Canada is the European Union’s 12th most important trading partner.

“The discovery is being taken very seriously. One does have to ask though just why the Germans did not let their concerns become known earlier.”

Lawrence Herman, Canadian Law Expert

Critics ask why Germany acts as if it has only just realized that these clauses, which are similar to wording protecting investments in the North American Free Trade Agreement between United States, Canada and Mexico.

“The discovery is being taken very seriously,” said Lawrence Herman, an international analyst specializing in Canadian law. “One does have to ask though just why the Germans did not let their concerns become known earlier.”

Clauses relating to foreign investor protection tend to pit investors against governments. Critics point to a lawsuit an energy company has launched to fight a fracking ban imposed by the Quebec regional government. The company, which leased land in Quebec with the intention of exploring for oil and gas through fracking, is using investor protection clauses in the NAFTA treaty as the basis of its law suit. Similar clauses exist in CETA.

The German government has repeatedly made it clear that such clauses in any treaty with the United States must also be looked at closely. There is a real possibility that Berlin’s stance on investor relations will also derail the Transatlantic Trade and Investment Partnership or TTIP, the trade agreement that is presently being negotiated between the European Union and the United States, sources said.

The German government sees no need for any treaty to include rules on investor protections and means of arbitrating disputes, as existing European and American law already covers these matters. At the moment, TTIP negotiations are on ice, and it’s unclear if much progress will be made this year. It is currently going through the open consultation stage with around 150,000 interested parties and is unlikely to be complete before November.

The investor protection clauses currently in the CETA are unacceptable to Berlin. Experts believe that the E.U. will push for an arbitrator, to help resolve conflicts between states and governments.

The Canadian government is still confident that any differences between the European Union and Canada can be resolved by September.

A spokeswoman for Germany’s trade ministry says the issue of investor protection has been at the heart of trade deals between Canada and the European Union. Germany has signed several bilateral trade agreements, which safeguard German interests, since negotiations on CETA began.

Canada is not yet a significant trade partner for Germany, ranking 27th below Japan, Brazil and the United Arab Emirates, but it is growing. German exports to Canada are currently worth just over €31 million ($42 million), up from around €21 million in 2009, when negotiations on the treaty first began.

Economics Minister Sigmar Gabriel’s concerns over the treaty come as a surprise to many, because on Chancellor Angela Merkel’s last visit to Canada, she told Canadian Premier Stephen Harper that she was keen to complete the treaty quickly. That was two years ago.

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