A Canada – European Union Trade Deal?

The Globe and Mail is carrying a report today on a possible Canada-EU trade deal, suggesting that negotiations will be launched shortly after the election.

http://www.theglobeandmail.com/servlet/story/RTGAM.20080918.wtrade18/BNStory/International/home

Described as a negotiation of deep economic integration, “the proposed pact would far exceed the scope of older agreements such as NAFTA by encompassing not only unrestricted trade in goods, services and investment and the removal of tariffs, but also the free movement of skilled people and an open market in government services and procurement – which would require that Canadian governments allow European companies to bid as equals on government contracts for both goods and services and end the favouring of local or national providers of public-sector services.”

The prospect of a NAFTA on steroids is disturbing, but not very surprising given the ideological orientation of European Trade Commissioner Peter Mandelson and his Canadian counterpart Michael Fortier. Talks to this stage also profoundly reflect ongoing lobbying for a pact with the EU by the Canadian Council of Chief Executives, and the strong bilateral relationship between Quebec Premier Jean Charest and French President Sarkozy.

We can expect the incorporation of the investor rights provisions of NAFTA, which allow investors to sue governments for losses due to regulatory and other measures, and major restrictions on the ability of governments to regulate to protect jobs and to maintain strong standards. It remains to be seen if all provinces will fall in line with the apparent EU demand to drop local content requirements in sub federal government procurement (but Danny Williams and, perhaps, Dalton McGuinty seem unlikely to agree.)

All of this is especially disappointing given that we could imagine quite a different deal with the EU. It would, in principle, not be a bad thing for Canada to broaden its trade in both goods and services away from heavy dependence upon the troubled US economy.

Moreover, what one might term social democratic Europe would be a great partner with whom to negotiate a different kind of trade deal than the NAFTA model. The EU itself and many member governments have defended the precautionary principle in terms of setting environmental and product standards, as opposed to lowest common denominator standards supposedly reflecting hard science. Imports of GMO products are heavily restricted, for example. The EU has set far more ambitious targets for greenhouse gas reductions, and one could imagine setting some common standards. And, last but not least, almost all EU countries respect core labour rights and maintain good labour standards. Indeed, the EU itself sets some common standards for working hours, health and safety, and the rights of temporary and part-time workers which could be folded into a trade deal.

Moreover, while not reflected in the neo liberal pronouncements of Mandelson, many EU countries – perhaps most notably France – do still intervene in the economy to regulate foreign ownership and to require foreign investors to maintain and create jobs.

In short, one could imagine a non NAFTA type deal which promoted more trade, but restricted social dumping and recognized a legitimate government role in managing the economy. That’s not what Mandelson and Fortier have in mind, but is worth promoting, especially at a time when NAFTA itself may be open to change if (I should say when) Obama wins.

(Thanks to Scott Sinclair for sharing his thoughts on this.)

4 comments

  • One could imagine, but given European and British trade unions have already caved on the basic neoliberal character of the EU what social forces are there in Europe to push for a rigorous trade agreement that was as interested in enforcing workers rights (and augmenting them) as it is in enforcing the rights of capital? Social Europe is a hodge poge of soft legislation and directives. At that seems to be the very best we could get in such a deal. Then Canada, like the English can get a permanent opt out of the work directives.

  • My prediction is that everyone and their dog would love to work for a couple of years in Europe. After all, who on the left would tell workers that it’s NOT in your best interest to have the right to move to France? The promoters will highlight that section and downplay the investor-state provisions.

  • The idea of a Canada-EU economic agreement makes imminent sense, both from a historical, cultural and purely economic perspective (who doesn’t want a little diversification from the sinking tank to the south), but it has yet to advance to anything tangible to-date. In part this is because of the tricky division of powers here in Canada, but I would wager also because of the challenges negotiating with the EC and the EU Member States (and navigating their own complex division of competency).

    It’s because of the latter that I would wonder how much the EC can really advance a ‘deeper integration’ agreement with anyone. Having spent the bulk of the past few years working with developing countries trying to help them ‘negotiate’ ‘development-supportive’ trade agreements with the EU (i.e. damage control), the Commission has always been quick to remind their trading partners that x or y is not negotiable as they do not have the authority (this is admittedly part tactic, but also legally accurate). This means that as far as I understand, the EC does not (currently) have the competency to negotiate such things as investor-state provisions, nor labour mobility beyond a very circumscribed definition where it is tied to a commercial establishment/presence in the home or host state (i.e. only larger corporate settings). The current EC mandate on investment is very limited in fact, dealing largely with securing greater market access (or pre-establishment rights) and nothing close to the likes of NAFTA Ch. 11. Similarly on services, there is no single EU services market to speak of, nor free movement of services within the EU. Instead they have a messy mix of national regulations, loosely (though increasingly) tied together via the EC Services Directive (and others).

    These are all of course important elements to keep on the radar (and fight for their exclusion if need be, should things advance), I’m just unsure as to how far the EC can go on these issues even if they wanted to.

    As to the mercantilist vs. social democratic tendencies the EC might exhibit in these negotiations, you can be sure the EC Trade Commissioner, Mr. Mandelson, will pursue the former vigorously (as he has, to the degree of humiliation, with some of the poorest countries in the world). While he is due to be replaced mid-2009, I wouldn’t expect a significant change in direction with someone new at the helm. That said, as Andrew rightly points out, many governments in the EU are adamant to maintain certain rights to intervene in the economy (subsidies anyone) and accord preferential treatment to national/EU firms (including via government procurement). To me this just emphasises that the Commission with be hard pressed to pursue their rhetoric on deep integration (at least not without a new mandate).

    At the end of the day it is a shame, because there would in principle be an opportunity to negotiate a new type of trade agreement that reflected some generally progressive values, promoting economic cooperation alongside improved social and environmental standards, without having to unnecessarily whittle away national sovereignty. The Europeans, with their ‘Global Europe’ strategy have signalled they want nothing of the sort (http://ec.europa.eu/trade/issues/sectoral/competitiveness/global_europe_en.htm). As to the Canadian government – be it Conservative or Liberal – well, I guess that one would need a whole other rant (err, post) now wouldn’t it…

  • Something strikes me as a little curious about the proposed EU-Canada trade deal, expected to be launched October 17th, a few days after Prime Minister Harper hopes to receive a renewed mandate to torment us with incessant silly tax cuts.

    Just a few months ago, the French President Nicolas Sarkozy said he thought the EU should impose carbon tariffs on imports from countries that don’t take enough action on climate change. The EU agreed that it could “take appropriate action”. Canada had been previously singled out as one of these countries.
    http://www.nationalpost.com/opinion/columnists/story.html?id=6dcb1379-42e1-4200-a656-cef828629182&k=92193

    And now they are prepared to agree to a free trade deal to eliminate all tariffs? Would they be satisfied with Harper’s Turning the Corner greenhouse gas intensity scheme, that was even panned by Deutschebank, among many others? With the provinces promising to join the Western Climate Initiative’s cap and trade program?

    Perhaps, but I somehow doubt it.

    Could it be that Harper may be prepared to agree to a real cap and trade program to get a free trade agreement with the EU?

    Harper’s European tour in the spring was ostensibly to try and convince them about his position on climate change, but it now appears that the trip was really about other matters, including this deal.

    The federal government only introduced a national organic label standard a few years ago because the EU set a deadline for Canada a few years ago, and said that they wouldn’t recognize imports from Canada as organic without it.

    Could the same thing be playing out on climate change?

    Strategically it would work: get the energy patch to agree to cap and trade as the price of admission to an EU trade deal; get the environmentalists on side with a free trade deal with Europe.

    Am I being too suspicious? Or is it all realpolitick about oil and investment?

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