Job Growth Claims From Trade Deals Debunked

A recent German television news spot on the fledgling EU-U.S. Transatlantic Trade and Investment Partnership blows up the myth of massive job growth and higher wages from a free trade deal. (See video capture below with subtitles courtesy Corporate Europe Observatory.) Director of European trade policy, Karel De Gucht, is speechless (around minute 6:30) when presented with the findings of his own Commission report on the TTIP showing per annum GDP growth of only 0.05 per cent under the most “ambitious” (liberalized) result.

“Let us interrupt (the interview),” he says, asking “Is that the study that we have commissioned? Can I see it?”

The comical situation is depressingly familiar.

The Harper government only has about five things to say when talking about its still unfinished Comprehensive Economic and Trade Agreement (CETA) with the EU. One of them is that the deal, if it’s ever signed and ratified, would be worth $12 billion to the Canadian economy. That low figure was, to begin with, conjured out of wishful thinking, and has since been cut in half by other studies.

Harper paid for these meager gains with a list of costly public policy changes, including longer patents on brand-name drugs costing us $1 billion a year, a ban on municipal and most provincial “buy local” policies, reduced rights for farmers to save seed from year to year, and a freeze on public services.

Unfortunately, unlike the German news report, the Canadian media tend to report the $12-billion fiction as fact, and the only important fact, in coverage of the ongoing Canada-EU negotiations. It has created obstacles to fighting CETA in Canada, though not insurmountable ones. The agreement remains highly controversial for all the reasons just mentioned.

There is better news in Europe where a lot of people are looking at the tiny economic returns from a TTIP with the United States and asking what they’re going to pay in the form of reduced policy space, regulatory convergence, and supermarkets full of GMO grain and hormone-laced meat. Resistance is possibly strongest and most pervasive to a planned investment protection chapter and investor-state dispute settlement process (ISDS) in the TTIP, with even some pro-ISDS governments like France worried about the political fallout.

As we’ve talked about before, the controversy is infecting (in a good way) the Canada-EU negotiations. There’s a developing consensus that if the investment protections, which let companies sue governments in private arbitration for new policies or decisions that reduce or interfere with their investments, are not needed in the TTIP they have no place in CETA either.

The discussion got a boost when the Trade Justice Network leaked a November 2013 draft of the CETA investment chapters. In December, International Institute for Sustainable Development (IISD) trade analyst Howard Mann referred to in a presentation to a parliamentary trade committee studying the “deal in principle” with the EU.

“Unless there are major changes, the [CETA] will give foreign investors in Canada the most investor-friendly set of corporate rights ever included by Canada in a treaty,” wrote Mann in an iPolitics.ca column summarizing his argument. “These measures would weaken the ability of Canada’s elected lawmakers, both federal and provincial, to legislate in major areas of public policy, including environment and health.”

They would weaken European democracy as well, and possibly provide U.S. investors with a backdoor for challenging EU policies through subsidiaries in Canada.

On February 10, the EurActiv website published a highly shared article warning “EU-Canada free trade deal ‘opens door to environmental lawsuits.'” It explains how “multinationals will have wide-ranging powers to sue EU states that enact health or environmental laws breaching their ‘legitimate expectations’ of profit, according to a leaked ‘investment chapter’ from the Canada-EU free trade agreement (CETA), which was signed last November.”

(Note: Harper signed what looked like a blank piece of paper then hugged and misnamed Commission President José Manuel Barroso in Brussels on October 18. Both sides continue to haggle over many of the CETA chapters, including investment, as well as on whether or not to make human rights violations punishable through trade sanctions, which Harper is loathe to do. EU Ambassador to Canada said in January that “we might have a text in about six months” but that a final text could take up to two years to refine and translate.)

EurActiv quotes the European Commission saying that CETA “reaffirms the right of the EU and Canada to regulate to pursue legitimate public policy objectives.” But the article adds that, “no such right is affirmed over the whole text, merely a sub-chapter of it that deals with expropriation.” The reality is that just like in NAFTA, whether a regulation is legitimate or not will depend on the regulation not interfering with the rules of the CETA investment chapter, and that often depends on the tribunal hearing the dispute. The Commission’s argument is circular, moot.

“Another problem with CETA is its language in what is called a Most Favoured Nation provision,” says Mann in his iPolitics.ca article. This provision requires Canada and the EU to offer the same level or rights to each other’s investors as any other investor would have. Sounds fair, but as Mann explains:

The current draft allows the provisions of prior treaties concluded by Canada to be adopted by EU investors in the case of disputes. So even though CETA includes some language that may protect the regulatory ability of governments, investors will be able to use provisions from older treaties that were not as carefully drafted to simply get around this language.

Commenting on a slightly earlier draft, which is not much changed in the November text, Nathalie Bernasconi-Osterwalder, another investment expert at IISD, put the same issue this way:

The MFN provision, as currently drafted, does not limit the possibility for investors to import provisions from other investment treaties. In effect, this would allow foreign investors to cherry pick provisions from other, including older, treaties belonging to the EU and Canada, which risks nullifying any progress made in the CETA to modernize investment law. This would be a serious reversal of Canada’s position in its 2004 Model FIPA [Foreign Investment Protection Agreement], which prevented such cherry picking from older language treaties.

An open-ended definition of “fair and equitable treatment,” as well as the possible inclusion of a so-called “umbrella clause,” which would let investors take any breach of contract with government to private arbitration instead of the courts, are two other ways CETA will offer corporations many more opportunities to sue Canada, the EU or EU member states for loss of profits from any number of legitimate government decisions.

These questions continue to dog investment negotiations between Canada and the EU. What is really holding up the talks, though, are questions like, Who will pay the fines for Canadian corporate challenges to European member state policy? Or, Who will be responsible for defending those policies? According to EU Trade Insights:

when it comes to who will bear the costs of the litigations under the so-called ISDS scheme, the EU doesn’t yet have an answer. Three-way talks between the Commission, the Council and the European Parliament are still on-going. And after four rounds of negotiations, the issue seems to be still far from being settled.

“Member states are clearly divided on the issue of whether or not to give the Commission the power to intervene in the litigations,” continues the article. A February 10-14 meeting to hear a Greek proposal to end the internal debate was postponed. “And while discussions are already difficult within the Council, those MEPs who oppose the inclusion of the ISDS mechanism into the TTIP are aiming at blocking the proposed regulation, hoping that without the financial framework, the Commission won’t be able to negotiate trade deals which include the investor-state arbitration procedure,” writes EU Trade Insights.

European MEP, labour, consumer and environmental group opposition to these investment rules in CETA and the TTIP has forced a public consultation out of the Commission, which should begin in March and wrap up by June. Two transatlantic civil society statements, one regarding CETA and the other the TTIP, signed by hundreds of organizations, ask that legislators on both sides of the Atlantic refuse to endorse the treaties until the extreme ISDS process has been taken out. The debate will almost certainly play out in upcoming European elections.