Canada Braces for EU Trade Pact Dispute With Germany

Canada is bracing for a dispute with Germany over whether its newly-agreed free trade pact with the European Union should be re-opened to erase arbitration clauses.

The final text of the accord, known as the Comprehensive Economic and Trade Agreement, was sealed Sept. 30, after five years of negotiations. Germany’s late call to question dispute settlement clauses has left Canadians puzzled, Canada’s chief negotiator, Steve Verheul, said today in Berlin.

Canada wants the rules embedded in the free trade accord “to stay in,” before the pact’s ratification, said Verheul in an interview in Germany’s lower house of parliament, where he was due to “explain Canada’s position.” Legal regress clauses that are outlined in the CETA agreement mark “considerable improvements on flawed arrangements of the past,” he said.

The incoming EU Commissioner for Trade, Cecilia Malmstroem, is lining up with Canada to defend investment protection in CETA, while German Economy Minister Sigmar Gabriel, a Social Democrat, is adamant he’ll seek support for removal of the clauses before planned ratification of the accord next year. Re-opening the agreement means it “risks falling apart,” Malmstroem said on Sept. 29.

Wrangling over arbitration rules belies a surge in popular misgivings in Germany over the outcome of efforts to clinch an EU-U.S. trade accord, for which CETA has been perceived as a model.

German Divisions

German Chancellor Angela Merkel, who champions free trade with Group of Eight partners, is faced with divisions in her own coalition over arbitration rules as well as wider concerns among the general public.

Gabriel, in comments made on Sept. 25, blamed the European Commission for agreeing to the CETA clauses in 2011, and said Germany must “urgently” work with its EU partners to have the legal facility removed as domestic laws are adequate to address investor disputes.

Merkel has touted free trade deals with North America as a “mini-stimulus program” that would create thousands of jobs. That tallies with the hopes of Canadian Prime Minister Stephen Harper, who hopes CETA will create 80,000 jobs, the Toronto Star reported on Sept. 30, the day he signed off on the final text.

CETA promises to abolish as much as 98 percent of customs duties between Canada and the 28-nation EU trade bloc.

The inclusion of company protection clauses in CETA and a possible accord with the U.S. may make sense to gain the confidence of investors that’s central to promoting trade, said Elisabeth Winkelmeier-Becker, who is the legal spokesman for Merkel’s Christian Democrats, in a Sept. 23 e-mailed statement.

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