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The CETA negotiations,
which were first expected to be concluded over a year ago, have continued to
drag on through the summer, the autumn and now even the winter. It took Canada
a long time to decide that it wanted the CETA and even longer to convince the
EU to negotiate. Now, when both sides really want the CETA, it is proving
harder to get than either expected despite the obvious advantages of liberalising
trade between the two parties.
It was always understood
that the EU would demand that provincial governments should make extensive
concessions with respect to their service and government procurement markets,
something that did not happen with NAFTA in 1004. Some Provinces, although
wishing an agreement, are still refusing to open access to utilities such as
Hydro Québec. The EU has made no secret of its desire to have Canada extend the
period of patent protection under Canadian federal law extended beyond the 20 years
set under NAFTA and TRIPS. Provincial governments will be faced with very
unpalatable increases of provincial health system drug costs should this
concession be made.
It was also no secret
that the EU desired to have greater access to Canadian mining and energy
resources. It has only recently become clear that this takes the form of a
negotiating demand that Canadian federal foreign ownership laws be relaxed or
exempted with respect to EU foreign investment. Not an easy call for Ottawa,
especially as the impact is largely on provincially controlled natural
resources.
More surprising still
has been an apparent EU demand that Canada’s foreign ownership controls and banking
laws be relaxed with respect to the potential access to and ownership of
Canadian banks and insurance companies by EU investors. In response, Canada is
proposing a clause reading: “A party may
prevent or limit transfers….through the equitable, non-discriminatory and good
faith application of measures relating to maintenance of the safety, soundness,
integrity or financial responsibility of financial institutions or cross-border
financial service suppliers.” This may be linked to a joint dispute
resolution measure.
Negotiations over
provincial and federal service markets have been further complicated by the
fact that the EU is negotiating its first foreign investment chapter with a
complete mandate under the TFEU article 207.
The Commission has been feeling its way in this area, hampered by doubts
as to the desire of member states to have the Commission making bilateral
agreements over direct foreign investment, the extent of the exclusivity of EU
competence over domestic standards of treatment and the capacity of the EU to
commit itself to all forms of investor-state arbitration.
Both sides profess to be
eager to conclude. The sensitive issues are now well understood. Officials have
done what they can. A first meeting of the Trade Commissioner and the Canadian
International Trade Minister has taken place without reaching agreement and
another will take place very shortly. Canada has got what the negotiation it
wanted but has met a very determined EU negotiator, ready to ride roughshod
over provincial health costs, foreign investment controls and even the
integrity of the Canadian banking sector – one of the few in the Western world
to come unscathed through the financial crisis. The EU is said to be determined
to have an agreement which will set it up for a future EU – United States
negotiation. It is not certain that the Canadian federal and provincial governments
will be able to accept the terms.
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