EU Completes Legal Review of Free-Trade Accord With Canada

  • European Commission alters provisions on foreign investors
  • Draft agreement projected to enter into force in 2017

The European Union completed legal checks on a free-trade agreement with Canada after scaling back protection for foreign investors in a bid to win over skeptics in Europe.

The European Commission, the EU’s executive arm, altered provisions on so-called Investor-State Dispute Settlement during the review of the accord struck with the Canadian government in 2014. The ISDS measures foresee an Investment Court System in which publicly appointed judges rather than arbitrators would hear cases and an appeal tribunal would be established.

The trade deal, the EU’s first with a fellow member of the Group of Seven leading industrialized nations, was reached under the previous Conservative Canadian government of Prime Minister Stephen Harper. The alterations on foreign-investor rights won the blessing of the current Liberal government of Prime Minister Justin Trudeau, who took office in November.

“The new Canadian government has been very attentive to the European concerns on this,” EU Trade Commissioner Cecilia Malmstroem told reporters on Monday in Brussels. “We’ve had intense discussions on all levels.”

‘Sovereign Right’

The EU is Canada’s No. 2 trade partner, after the U.S., and Canada is the bloc’s 12th most important commercial partner, according to the commission. EU-Canada trade in goods was worth 59.1 billion euros ($64.2 billion) in 2014, while services commerce totaled 27.2 billion euros, the commission said.

The EU-Canada accord becomes the first planned free-trade agreement to include the new ISDS provisions, which are meant to ensure European governments’ ability to regulate in the public interest. Unveiled in September by Malmstroem, the ISDS measures are also being inserted into a draft EU-Vietnam trade pact reached last year and will be a model for the treatment of foreign investors in a planned commercial deal between the 28-nation bloc and the U.S.

Canadian Trade Minister Chrystia Freeland acknowledged the difficulty of winning support for the pact in Europe unless the ISDS changes were made, saying, “at the end of the day, you only have a trade deal if you can get it across the finish line.”

“The sovereign right of democratically elected governments to regulate, including in essential areas like environment and labor, is very important,” Freeland told reporters on Monday in Ottawa.

The EU-Canada agreement, projected by both sides to take effect in 2017, would end 98 percent of tariffs on goods traded from the outset and 99 percent after seven years. Each side would dismantle all industrial tariffs and more than 90 percent of agricultural duties. Markets for services and public procurement would also be opened under the pact. In Europe, the agreement still needs the approval of the EU’s national governments and the European Parliament.

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