CETA: Fair and Sustainable Trade or Environmental Trojan Horse?
by Tiziano Breda (November 21, 2016
It will eliminate 98% of the tariffs between Canada and the EU and, according to the European Commission, and it is expected to generate growth and jobs by: boosting exports, lowering the cost of the input businesses need to make their products offering greater choice for consumers and upholding the EU's strict standards for products.
While the economic benefits are likely to become a reality for European enterprises (and hopefully citizens), it is not clear which environmental costs can this agreement imply. All along the text, it is possible to note numerous references to the promotion of a cooperative behaviour between the Parties regarding sustainable development goals, the share of best practices and the respect of multilateral environmental agreements. However, at a closer view, it seems to lack a substantial environmental plan, it does not settle any environmental goal to be pursued, neither it foresees effective mechanism to regulate environmental issues and sanction those who do not play by the rules.
Surprisingly, the preamble of the text does not even mention the Paris Agreement or the need to reduce greenhouse gas emissions. Aside from chapter 24 entitled "Trade and Environment", references to climate are evasive and those to ecological policies are absent, pushing the ecological crisis into the background. The same definition of Environmental law in article 24.1 explicitly excludes "a measure of a Party solely related to worker health and safety, which is subject to Chapter Twenty-Three (Trade and Labour), or a measure of a Party the purpose of which is to manage the subsistence or aboriginal harvesting of natural resources".
Moreover, the Agreement references conservation and sustainable management in relation to only two sectors, namely forestry and fisheries, which are by the way fundamental. Other sectors such as mining, energy, and transportation, which have also extensively damaged the environment, are omitted. This is problematic and eloquent at the same time, given that the EU's partner in this agreement has the third largest oil reserve in the world, is the fifth greatest oil producer and the fourth oil exporter. Pursuing the liberal logic of the trade agreement, all goods in the energy sector including oil and gas will be exempted from customs duties and may be imported with lower costs.
CETA will also render it impossible to restrict the importation of these goods once they have been authorised, even in the case of major environmental and energy crisis, events that are not taken into account by the text. These trade commitments seem to favour corporations of the energy sector to the detriment of a more sustainable citizen energy recovery. This is apparently conflictual and incoherent with EU's objectives of reducing fossil fuels consumption and greenhouse gas emission (Europe 2020 and 2030). But there could be a way out: using the revenues gained from the access to a cheaper source of oil to push for more investments in renewable energy technologies. This could also disengage the EU from the dependence of Arabic countries’ oil, giving more credibility to its international positions on Human Rights, often violated by OPEC members, and avoiding to incur in energetic crises such that of 1973 by collaborating with a more affordable partner.
However, it may also affect the environmental situation in Canada, since tar sand oil extraction techniques are among the most polluting ones and this agreement is likely to raise the levels of production and the related risk of environmental disasters. In any case, there is no mention of this intention in the agreement and no official declaration by European institutions, nor limits of oil and gas extraction have been settled.
When the parties disagree and a matter arises they can call upon the Committee on Trade and Sustainable Development (CTSD) and/or to a Panel of Experts to give an opinion about certain issues. The CTSD is appointed to coordinate the parties, ensure that the Panel of Experts is composed by adequately prepared members and monitor the follow-up of its opinions, which must be taken into account by the parties when trying to solve a disagreement. Moreover, the text encourages the “implementation of already existing or new consultative mechanisms that shall comprise independent representative organisations of civil society in a balanced representation of environmental groups, business organisations, as well as other relevant stakeholders” (art. 24.13.5).
Basically, despite some efforts, while a new parallel private and supranational jurisdiction is provided for trade and investment, namely the CETA Joint Committee (art. 26.1), no sanction mechanism is foreseen for the infringement of environmental rules. The implementation of the environmental chapter will be based on non-legally binding principles of cooperation and exchange of best practices. This is anachronistic, given the fact that the EU has already been experiencing for decades the ineffectiveness of Environmental Action Plans with noble intentions but no tools to be implemented. Thus, the CTSD should be empowered and given the authority to make legally-binding decisions and sanction harming behaviours.
Of course, the Parties can pursue different policies and have different regulations. For this reason, it is important to exploit the Regulatory Cooperation Forum (art. 21.6), a body created with the aim of pursuing similar policies and facilitate trade by harmonising legislations. The CTSD should interact with the RCF in its functions, otherwise, the existence of a regulatory cooperation mechanism could also prevent de facto new legislations on many climate and environmental issues. Indeed any legislation deemed incompatible with the agreement by the RCF will have to be modified accordingly or abandoned. If, despite the RCF'S recommendations, a party would go ahead with its legislation, then private investors from the other party to the treaty would have the possibility to sue them.
When it comes to Investor-State Dispute Settlement (ISDS), the analysis becomes controversial. Many legal experts and academics have maintained that the inclusion of ISDS provisions in trade agreements between developed countries with well-established judicial systems is unnecessary given that the ISDS system was designed as a mechanism aimed at protecting investors from arbitrary or unfair actions by countries with politically unstable governments and less developed judicial systems. Indeed, ISDSs are seen as potentially dangerous for states and beneficial for enterprises. The Parties, dealing with this issue, tried to establish a more transparent and fairer mechanism, agreeing upon some rules to be followed by a permanent tribunal, whose members will no longer be appointed ad hoc by the investor and the state involved in a dispute but in advance, namely the Fair and Equitable Treatment and the Indirect Expropriation. Whether that will be enough to protect local entities and individual states from an aggressive action by an international enterprise is difficult to assess in advance.
In sum, CETA has admitted the existence of an environmental dimension of the FTA and tried to address it, a fact that is important per se. It has also established some mechanisms to foster cooperation on the promotion of sustainable development and the participation of institutional and civil society actors. However, it has not fixed some environmental goals to be pursued, neither it has settled binding measures to punish those who infringe the rule or cause environmental damages. It will mostly depend on Parties' good will and that could be a Trojan horse for the international commitments the Parties have undertaken to go beyond fossil fuels-based energetic provisions.
Tiziano Breda is Junior Policy Analyst at Bridging Europe
bridging europe services
Want to learn more? Click here
bridging europe membership
Want to learn more? Click here
bridging europe infographics & polls
Want to find our more? Click here