Germany may reject free-trade with Canada: Report - Toronto Star

OTTAWA—Canada's effort to open up trade with the huge European market appears increasingly at risk after a spike in concern in the EU about investor rights measures that have become a key feature of today's free-trade pacts.

Prime Minister Stephen Harper announced last fall that Canada and the European Union had reached a tentative agreement on a trade liberalization deal. But negotiations are still going on and, in the meantime, Europeans are growing increasingly wary of trade deals that allow multinational corporations to challenge government rulings before special international tribunals.

The Canada-EU pact contains such an investor-state dispute settlement (ISDS) mechanism, and it has become a focus of European worries as the EU considers whether to include similar investor protections in the pact it has begun negotiating with the United States.

The backlash against these ISDS measures has been growing for months and on Saturday a German newspaper reported German Chancellor Angela Merkel's government is moving toward rejecting the Canada-EU deal over this issue.

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Quoting German diplomats, the Sueddeutsche Zeitung said Merkel's government could not approve free-trade with Canada in its current form because of the investor protection provisions. All 28 European Union states must sign on to the deal for it to be implemented.

Businesses say the ISDS mechanisms are needed to convince investors their money is secure in foreign countries. But opponents of the measures say they give investors and corporations too much power to challenge national governments and get around regulations.

In January, EU Trade Commissioner Karel De Gucht responded to these concerns by suspending the EU's free-trade talks with the U.S. to conduct special public consultations in Europe on whether the deal should include ISDS measures.

Germany has questioned the need for these measures, as has France.

Canada did not address the German newspaper report directly on Saturday. But Shannon Gutoskie, a spokesperson for International Trade Minister Ed Fast, said, "Canada's work with our European Union partners to complete the legal text of our agreement-in-principle continues. Excellent progress is being made.

"Investment protections have long been a core element of trade policy in Canada and Europe, and will encourage job-creating investment and economic growth on both sides of the Atlantic," Gutoskie added.

European officials, who believe special tribunals are not needed because the regular courts can handle any legal challenges by investor or multinational corporations, have been concerned about the investor protection measures in the Canada-EU deal for some time and it poses a risk to the completion of Ottawa's deal with Brussels, one trade expert said Saturday.

This latest question mark in the Canada-EU talks comes as negotiators from Ottawa and Brussels were otherwise reportedly close to finalizing the so-called Comprehensive Economic and Trade Agreement (CETA), which has been five years in the making.

The Canadian government, however, appears to have been caught off guard by the eruption of worries in Europe about investor protection measures in free-trade pacts.

Those who follow trade issues say Europeans paid little attention to the content of CETA until the question of ISDS mechanisms came up in connection with the EU's negotiations with the U.S., in the so-called Transatlantic Trade and Investment Partnership talks.

Rupert Schlegelmilch, a senior European Commission trade official, recently said the U.S.-EU trade negotiations have created an "unprecedented focus" on the investor protection controversy.

Scott Sinclair, a Canadian who recently testified on CETA before a committee of the German parliament, said the report that Germany will not approve CETA comes as no surprise, given the level of concern he heard in Berlin about investor protection measures in trade pacts.

"The EU-U.S. negotiation raised the scrutiny of the CETA because there's been enormous controversy about this (U.S.) negotiation, including on investor-state dispute settlement. And the people started to say, 'Look, we've got this agreement with Canada and it includes the same provisions.' So that raised the temperature.

"There's a fair chance the whole (Canada-EU) agreement could unravel" over the investor protection issue, said Sinclair, a trade analyst at the Canadian Centre for Policy Alternatives.

Questions in Germany about the value of ISDS measures have been fed by Swedish power company Vattenfall's move to sue Germany for billions of dollars in compensation after the German government decided to phase out nuclear power.

Similar cases have raised doubts in Canada. U.S.-headquartered energy company Lone Pine Resources Inc. launched a $250-million lawsuit against the Canadian government under provisions of the North American Free-Trade Agreement after Quebec cracked down on fracking, a drilling technique for releasing oil and natural gas from shale rock formations.

In a similar case in 2010, Ottawa paid forestry giant AbitibiBowater Inc. $130 million to compensate the company for Newfoundland and Labrador's expropriation of its assets in the province.

With files from Tanya Talaga and The Canadian Press

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