CETA: Up Against the Wallonia

Topping the news this week is Canada’s relations with Europe, an entire continent of nations (and a nation itself, in the form of the European Union) that continue to lead the world in progress on gender and the status of women, energy and climate, and cheese.

Iceland, known for being the first Western nation to democratically elect a woman president in 1980, continues to be a world leader in establishing gender parity — largely because Icelandic women continue to demand it. On Monday, women went on strike to demand the gender pay gap be addressed. Meanwhile, despite Canada’s gender-balanced Cabinet, our government just voted against a bill designed to promote gender-parity in politics. We have a long way to go.

But when it comes to relations with our European cousins, CETA topped the news. The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union has been in negotiation for seven years. Canada’s provinces have been in on the negotiations from the beginning, as have the individual nations of the European Union; any significant holdup by even one party could delay the process. That holdup was provided by the Belgian region of Wallonia, whose reticence to sign dragged negotiations to the last minute, with the signing ceremony scheduled for tonight at Midnight. Wallonia’s opposition caused significant changes to the agreement to address their concerns, and the deal is going ahead after all.

Wallonian President Paul Magnette
Wallonian President Paul Magnette

Trade deals are always controversial, and they’re usually so complicated that it’s difficult to even get a clear understanding of what’s at stake, so it’s worth examining this a little further.

First, trade is an excellent thing. Trade is a peaceful way of interacting with other nations, that creates friendly relationships and ties that make war much less likely. Along with the flow of goods comes flows of ideas, values, and culture that helps us understand others better, and improve our own worldviews. And the economic benefits of trade are huge: it reduces the cost of all kinds of goods for everyone.

But trade also has “losers” — people who are negatively affected by goods coming in from another country. The basic idea is that each region has specialties, things that they can produce faster and cheaper than anywhere else because of some advantage they have. Consider strawberries: we grow excellent strawberries in Canada, but they are much smaller and less plentiful than strawberries grown in California. A business in Canada that grows strawberries cannot compete very well with a Californian strawberry farm, which can produce larger strawberries so quickly and cheaply (and with a longer growing season) that even with the cost of shipping, it is still cheaper to buy Californian strawberries than the ones grown down the road. Which is why all of our grocery stores carry California strawberries all year round, while local strawberries tend to be more expensive and only available during a short season in the summer. So a Canadian strawberry farmer might be considered a “loser” in relation to trade, as those Californian growers can take their business. That’s why, historically, nations have protected their own producers by putting taxes or “tariffs” on trade, which inflate the price of Californian strawberries so that local strawberries are cheaper.

Free Trade is a way of increasing trade by removing “trade barriers” such as tariffs. The argument goes that even though some people will lose their jobs, and some nations will even lose entire industries, on the whole we all benefit greatly from increased trade. A Free Trade Agreement (FTA) is a formal agreement between nations to remove trade barriers in order to increase trade and the benefits it brings to both sides. Knowing that some of our own industries will be negatively affected by such an agreement and jobs will be lost, governments on both sides negotiate the agreement to determine which industries will have barriers removed and which will not, with both sides hoping to gain the greatest trade advantage by expanding the potential of major industries while potentially hurting minor industries. So Canada might hypothetically be willing to sacrifice our strawberry industry (which will have trouble competing with Californian strawberries) in order to gain much greater access to larger markets for our maple syrup, for example.

The largest Free Trade Agreement we’ve yet been part of is NAFTA, the North American Free Trade Agreement with the US and Mexico. It was, at the time, the largest of its kind; now with CETA (with the EU) and the TPP (Trans-Pacific Partnership, with 12 Pacific rim nations signing on), trade deals are getting even larger. NAFTA was highly controversial when it was passed, and while we have benefited from it, it has a darker side too. That comes from the way that disputes between nations and foreign investors/corporations are settled.

Under a Free Trade Agreement, a nation has agreed to remove trade barriers in certain industries. When a nation puts up a new barrier to trade, companies that are negatively affected by that barrier are allowed to sue that nation in an international trade court for lost profits. As the link above points out, Canada is the most sued nation under NAFTA.

The point of a FTA is to create a climate of stability in which investors can confidently invest in a foreign country. That makes perfect sense. If you were unsure of whether or not the laws that would make your business there profitable might change next year, you might not invest. But on the flipside, that means that governments are somewhat limited in their ability to address concerns in a changing world. Consider environmental issues, which are rarely acknowledged in the financial ledgers of major corporations: when BC decided that bulk water exports was not good stewardship of this precious natural resource, they were sued for over $10 Billion.  Whether or not the lawsuit was successful doesn’t necessarily matter, because the threat of losing ten billion dollars of public funds is enough to make any legislature think twice about enacting environmental protections. It’s hard enough to get governments on board with environmental legislation, even as we face the threat of climate change, without adding the potential of getting sued for doing the right thing.

It is no surprise, then, that the major things that the Wallonian government were concerned about in CETA were environmental protections and Investor-State Dispute Settlement (ISDS) protocols. What makes ISDS particularly unsettling in the case of CETA (and the TPP) is that they were initially set to be secret. So if our government was being sued for enacting legislation in our best interests that happened to potentially harm the profits of a foreign investor, we would not even know about it. Our hands would potentially be tied by people we can’t even see.

It is very possible to have trade agreements that do not have ISDS protocols of this sort. The Wallonian government’s veto on agreeing to CETA allowed them to agree to CETA while still disagreeing with the ISDS setup, and it may so happen that we get our trade agreement without secret trade courts that can hamper our sovereignty. If Canada similarly decides against ISDS, that would go a long way toward a trade agreement that is transparent and respectful of our democratic institutions. From there, we would be in a place to use trade agreements as tools to further our ability to address climate change rather than hamper it.

There is tremendous benefit in trade, and tremendous promise in future trade deals. But that doesn’t make every trade deal good for our values, even if it is good for our pocketbooks. Cheers to Wallonia, for holding out for a better deal; we may yet get it.

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