8th July 2016

EC proposes conclusion and signature of CETA

On 5 July, the European Commission formally proposed to sign and conclude the Comprehensive Economic and Trade Agreement with Canada, a landmark new-generation free trade deal that the EU has been negotiating with Canada for years. To many, this deal with one of EU´s close allies across the Atlantic is seen as a precursor to the far bigger, and far more controversial TTIP with USA. The deal would abolish almost all customs and duties between the two blocs, just as a “standard” free trade deal, but will not stop there. It will liberalize trade in services, minimize the gap between regulatory standards, open up public procurement market and liberalize investments. All of this while preserving the environmental and social standards, as well as the right of both sides to regulate in public interest. The controversial investment protection mechanism has been modernized to include a publicly appointed panel of judges and an appellate mechanism.

The main contentious point on the EU side has been the EU´s competence to conclude the deal in its entirety. It touches upon areas that are explicitly exclusive EU competences - trade in goods, services and foreign direct investment. However, the deal covers also adjacent areas, mainly portfolio investments. These are not mentioned explicitly in the Treaties, and so should be considered member state competence. But EC lawyers suggest they are included implicitly. The issue is before the Court of Justice of the EU regarding a different deal, an investment agreement with Singapore. A judgment is expected by the end of 2016 and will clarify the issue. If all investment chapters are seen as exclusive EU competence, only a Council decision (adopted by qualified majority) and EP´s approval would be needed to conclude and ratify the deal. If portfolio investments are seen as national competence, the EU (Council of ministers and EP approval) and all the 28 member states would need to ratify (usually via national parliaments).

The EC long pushed for an “EU-only” deal, which would be quicker, but politically sensitive after the Brexit referendum. Member states, on the other hand, wanted a say for their parliaments. They could overturn the EC´s proposal for an “EU-only” deal and change it into a “mixed agreement” unanimously. This unanimity has been fading lately, however, plus the issue would be a huge political problem. The EC thus decided at the last minute to propose a “mixed agreement”. This means on the one hand, that the ratification process will drag on for years (in previous deals it took approx. 5 years) since as many as 40 parliaments (national, regional) will have to approve it. On the other hand, regardless of the member state ratification, if the Council and the EP give their go, CETA can be applied provisionally in areas of EU competence (vast majority of chapters).

Opponents of the deal see a chance to derail it in the tens of national assemblies, while proponents say it can boost its legitimacy. In any case, CETA´s fate will be a precursor for TTIP´s fate.

For more, click here, here and here.

Members of the American Chamber of Commerce in the Czech Republic