Oireachtas Joint and Select Committees
Wednesday, 22 September 2021
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
EU-Canada Comprehensive Economic and Trade Agreement: Minister for Enterprise, Trade and Employment
I thank members and witnesses for participating in today's meeting in line with the exceptional circumstances we have to deal with under Covid-19. Members and all in attendance are required to exercise personal responsibility in protecting themselves and others from the risk of contracting Covid-19. Today is the first meeting in a long time where people can physically come into room as well as ourselves. Members are required to practice good hand hygiene and leave at least one vacant seat between themselves and other attendees. They should also always maintain an appropriate level of social distancing during and after the meeting. Masks should be worn at all times during the meeting, except when speaking. I ask for full co-operation in this matter.
Any member participating in the meeting remotely is required to participate from within the Leinster House complex only.
Today the committee will give consideration to the EU-Canada Comprehensive Economic and Trade Agreement, CETA. To assist us in considering these matters I am pleased to welcome the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Varadkar, who is participating in the meeting online. Members will recall that the Joint Committee on European Union Affairs gave comprehensive consideration to this trade agreement earlier this year and engaged with a wide range of witnesses, including the Minister. The committee published its report on the matter last week and laid it before the Houses of the Oireachtas. However, given that this committee's remit specifically relates to the affairs of the Department of Enterprise, Trade and Employment, we decided it would be appropriate for us to engage directly with the Minister on this matter.
I wish to explain some limitations to parliamentary privilege and the practice of the Houses in respect of reference witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected, pursuant to both the Constitution and statute, by absolute privilege. This means that witnesses have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Chair to ensure that this privilege is not abused. Therefore, if statements of witnesses are potentially defamatory in respect of an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative that they comply with any such direction.
Unfortunately, the Minister's opening statement has not been received by the committee, and on behalf of the committee, I express our disappointment that we have not received it. We have raised that with departmental officials and Ministers of State in the past when we have not received opening statements. It is important that members get the opening statement before the meeting starts so that they can address it and contribute as best they can. I call the Minister to make his opening contribution.
I thank the Chairman. I apologise for not getting the opening statement the committee earlier. I did not have a chance to clear it until last night. As an aside, I mentioned that on previous occasions statements given by Ministers to committees have appeared in the media before they were given and obviously I encourage members, if they receive a statement in advance, to respect the confidence of it and not share it.
I have raised this issue unfortunately with the Minister of State for the Department when we have not received the opening statement. It is very unfair to the members of the committee not to receive that in time. Please continue, thank you.
I thank the Chairman and committee members for the opportunity to discuss this important trade agreement for Ireland. As the committee will be aware, the Joint Committee on European Union Affairs debated CETA over several hearings and published its report last Wednesday. I hope we are moving closer to a time when we can take a vote of ratification. Ratifying CETA is Government policy and an objective of mine as Minister for Enterprise, Trade and Employment. While I welcome the scrutiny, I do not want ratification delayed and drifting indefinitely, and for Ireland to have to stand by and watch other EU member states ratify it ahead of us, as the majority have. That would send out the wrong message to the world - one of a waning commitment to trade and free enterprise in Ireland which would have negative consequences for investment and employment. Ireland should be a leader in Europe and a first mover when it comes to free trade.
As a country, we owe our relative prosperity to the goods and services produced by our people and our land, which we sell around the world. This formula that has worked well. It is based on international trade, our attractiveness as a place to invest and our ability to enter into international free trade agreements with other countries. Our position at the heart of Europe, its single market and the eurozone is also crucial to this. This economic model has consistently raised our living standards through the decades and created hundreds of thousands of jobs for our citizens. We will depend on that for our pandemic recovery.
Since the provisional application of CETA in 2017, the benefits have been plain to see. Goods exports to Canada increased from €953 million in 2016 to more than €1.7 billion in 2020. That is an increase of 78% in a little over five years. Services exports grew from €1.6 billion in 2016 to more than €2.3 billion in 2019, an increase of 44%. This benefits all Irish jobs, businesses and tax revenues, which we use to fund our public services and public infrastructure. The elimination of tariffs, reduced trade barriers and simplified customs procedures and the more compatible technical requirements that flow from CETA make it easier and cheaper for Irish companies of all sizes to trade with Canada.
In April this year, my Department released the results of an independent study by Copenhagen Economics of the potential economic opportunities for Ireland of the EU free trade agreements, FTAs, with Canada, South Korea, Mexico and Japan. It found that these four Union FTAs are forecast to have a positive effect on trade, GDP and national income for Ireland. The deal with Japan benefits us the most of course, due to the size of that country which has approximately 120 million people relative to Canada’s 38 million. An important finding in the study is that real wages would increase by up to 4.4% in 2030 as a result of the trade agreements, with the largest increases for low-income workers. This demolishes the idea that well-designed free trade agreements exert downward pressure on wages and labour standards when, in fact we know the reverse is true. As members will be aware, the full coming into force of CETA, once ratified by all member states, will result in the implementation of the investment chapter of the agreement, including provisions for the resolution of disputes between investors and states should they arise. This has been the area of most controversy.
All international agreements have dispute resolution arrangements; they need to. Where such agreements cover, not only trade in both goods and services but also investment rules and protections, there must be some form of dispute resolution mechanism that covers investments. The EU’s new approach to investment protection is the investment court system, ICS, which is contained in CETA and replaces the original investor-state dispute settlement, ISDS, mechanism. It is important to point out that this is something that we, as the EU, looked for in negotiations and wanted included; it is not something being imposed on us by anybody else.
On the ICS, I emphasise the rights of governments to regulate in the public interest are paramount and I believe they are fully protected under the terms of this agreement and the accompanying joint interpretative instrument. Investors may utilise national courts or the ICS but cannot use both to forum shop. Equally, it is important to remember that a Canadian firm can already sue the Government for alleged unfair treatment or discrimination in our courts whether CETA exists or not. In the courts today, we see plenty of examples of companies suing the government and its agencies or the government and its agencies suing private companies. The same will apply to Irish companies that operate in Canada and it works very much in both directions. What CETA simply provides for is an arbitration alternative to using national courts. However, that alternative, unlike a challenge in the courts, cannot find any act of a government to be ultra viresor unconstitutional. It is concerned only with redress or compensation if harm and discrimination is proven.
In Ireland, were we not to ratify CETA and instead sought to allow provisional application to continue on an indefinite basis, this would bring substantial legal uncertainty for businesses around tariffs and market access, as well as customs and conformity requirements. It is also the case that indefinite provisional application is unprecedented and would be open to legal challenge; just leaving things as they are is not a viable solution. There would be no quantitative benefit to Irish businesses or the economy overall in rejecting the agreement.
Regarding potential costs, it would be an entirely hypothetical exercise to try to estimate what, if any, costs could arise for the Exchequer on foot of any judgement under the ICS or to say what type of discrimination would be substantiated against the State. I would argue the State is not going to discriminate against any Canadian companies. It is also not possible to anticipate the sector of the economy or the size of the company which may pursue such a claim, but the Irish State has a strong reputation for rule of law and has no record of treating inward investors unfairly, inequitably or in a discriminatory manner, which are the criteria under which an award could be made. In contrast, we are usually accused of the opposite. Hence, the State’s exposure to economic loss cannot be regarded as materially affected by the introduction of the ICS mechanism provided for within CETA. This is particularly so given the existing recourse that inward investors from any jurisdiction have to the domestic courts.
In light of the experience and track record of the Government in supporting foreign investment in Ireland, the risk or likelihood of an award being made against the State could be considered negligible. On that basis, the protections offered by CETA to Irish investors in Ireland would far outweigh any potential exposure to the State under the agreement. The day-to-day administrative costs of the ICS tribunal, including the retainer fees of the fifteen members, will place no charge on the Exchequer and will be covered by the budgets of the European Commission and the Canadian Government. Therefore, there are no costs directly arising from CETA. Under the ICS, a state can never be forced to change its legislation, only to pay fair compensation in cases where an investor is deemed to have been treated unfairly under the specific grounds detailed. An investor cannot be given compensation just because it has lost profits or suffered economic loss or costs; it is for the investor to prove it was discriminated against and to establish that it incurred losses as a consequence of that discrimination.
CETA preserves the right of each member state to regulate to achieve legitimate policy objectives, such as the protection of public health, the environment or consumer protection, meaning policies such as those relating to plain packaging on cigarettes, for example, or minimum alcohol pricing can, and will, continue to be introduced. These "right to regulate" provisions are specifically designed to avoid any danger of so-called “regulatory chill”. As part of the finalisation of the agreement, the EU and Canada also agreed a legally binding joint interpretative instrument that was added to CETA to provide further assurances in relation to public services, labour rights, environmental protection and investment. CETA does not restrict either the EU or Canada from passing new laws in areas of public interest, such as the environment and health and safety, nor does it affect the Government's scope for developing new laws in response to the needs and priorities of Irish citizens. Importantly, within CETA, both sides agree that more trade and investment should not be at the expense of environmental protection and labour rights. The EU and Canada will not seek competitive advantage through lowering of standards in any domain. On the contrary, the EU and Canada are committed to ensuring CETA helps confirm that economic growth, social development and environmental protection can go hand in hand as far as is practicable.
As a small, open economy, Ireland has benefited from our export-oriented enterprises trading across the globe and, therefore, we support international trade and the EU FTAs that seek to underpin this. Ireland has been, and is, an attractive destination for foreign direct investment, FDI, for many decades, and participating in EU third-country agreements that cover investment and provide investment protection continue to assist us in marketing Ireland as a competitive FDI-friendly jurisdiction for multinational enterprise to invest in, with the attendant jobs and prosperity that entails. On that basis, and given that there can be no doubt that CETA is a high-standard agreement, I believe that ratifying the agreement, albeit at this late stage, would send a positive message to our trading partners around the world, and to our ally, Canada, that Ireland continues to be committed to the values of open and fair global trade.
I again thank the committee for taking the time to consider the agreement in detail. I hope this process can help us to move towards ratification soon. Again, my apologies for not being able to send the committee this statement in advance.
I thank the Minister. I ask that one of his officials forwards the statement to us so we have a written copy of it. I invite members to discuss the issue with him. I remind those participating remotely to use the "raise hand" function on Teams and, importantly, to cancel it when they have finished speaking. We have a rota in place that will apply for the next two weeks at least. The first person to indicate is Deputy O'Reilly. She has 14 minutes.
Before I ask my question, I will briefly raise the issue of the practice of sending opening statements to committees at the last minute, which the Chair has commented on. It happens quite a lot and it is not helpful. It means we do not have an opportunity to engage with the material and it does not enhance the quality of the debate. The Minister said the statement was not cleared until last night. I get that and it is fair enough. He is busy and that happens but he also said there are sometimes leaks from committees. There are not. It is not a problem or an issue with this committee. If it is the case that there are leaks, that is fine but they do not come from us and I do not want that impression to be given. Perhaps he can clarify if his issue was one around fear. There was nothing controversial in his statement and nothing that could not have been predicted. It is one thing if there is an issue around leaking. If it is an issue around time I completely accept that and I get that the Minister is busy.
It was the Minister who mentioned the issue of leaking so I wanted to clarify that. Does he have a timeframe for the ratification? He said he wanted to move as soon as possible. How long is a piece of string on that? Has he a timeframe in his mind? Given the public statements from some members of the Government parties regarding their opposition and concerns about this, is he concerned the Government will lose Deputies over it? While he is saying on the one hand that he wants to shift to ratifying, for reasons we can explore because they are not obvious, equally he is not giving a timeframe for it. Does he have a timeframe in his mind? Is it his intention to set aside time to debate and vote on this agreement in the short term or medium term or does he have a timeframe in his head?
I would like to have had it ratified. It was approved by Cabinet last December. There was to be a vote in the Dáil but we decided not to go ahead with it because people wanted more time for more scrutiny. There have been a number of committee hearings. As the Deputy said, the EU committee has produced its report. There is a legal challenge to the agreement but the High Court judgment on it is very clear; there is no requirement to have a referendum for an agreement of this nature. Court challenges and committee hearings are holding us up at the moment but, ultimately, while the committee hearings and court cases are interesting to have, they will not change anyone's mind on this. People are in favour of this agreement or they are not. There is a majority in the Dáil to ratify it and I would like to see that vote happen, but we do not have a date set for that as yet.
We have not set a date for it. We were not going to push this to a vote while the High Court challenge was ongoing. We are very happy with the court's judgment, which was an unequivocal decision.
Obviously, out of respect for this committee and others, we want to allow committees to have their hearings. I have not set a date, however. Like I said, I encourage all Members to allow democracy to take place and allow there to be a debate and a vote in the Dáil. Many Members have been seeking to defer that, whether it is through committee hearings, court cases and so on, and that is fine, to a point. At an ultimate point, however, they should respect democracy and allow a debate and a vote on it in the Dáil.
Is the Minister concerned at all about the introduction of the ICS into our legal system? It is clear that it will put the interests of corporations above those of ordinary people and the rights of people living here. It is not right or sensible to solidify a situation whereby corporations can sue national governments. We know this has happened. The Australian Government was sued for hundreds of millions of dollars by Philip Morris for implementing plain packaging. The Canadian Government has also been sued multiple times by Eli Lilly and Company and in other instances.
A special court for corporations will act as a major deterrent for Government in passing laws that might benefit citizens but may not benefit corporations. It will have a chilling effect on the likelihood of those laws going through because there is a chance that the Government will be sued for hundreds of millions of euro, in some instances, by large global multinational corporations with deep pockets. We do not want a situation whereby, let us say, the Government wants to tax vulture funds, and it is a case of, "Sorry, lads, we cannot do that; we might get sued." Conflicts may arise where a separate ICS specifically for corporations puts their interests ahead of those of the people.
Is the Minister concerned in the slightest about it? Is he quite satisfied that there is no possible detrimental impact from this? When I look at it, I see investor courts - special courts for corporations - putting their interests above the rights and entitlements of our citizens. That concerns me. It would worry me if the Minister was not concerned about that.
I thank the Deputy. Corporations sue governments all the time. If the Deputy went down to the Four Courts today and looked at the court list, she would see many examples of corporations suing Departments, the Government, Ireland and its agencies and vice versa. The Government sues companies regularly where we feel they have breached a contract or treated us unfairly. It is, therefore, a red herring to suggest that the introduction of an ICS would cause this to happen. This happens all the time.
Some of the cases the Deputy mentioned were not in investor courts. They were in regular courts in those jurisdictions. This idea that all of a sudden companies will be able to sue governments and vice versais a red herring. That has been the case since courts existed and companies were given legal personality. It is incorrect and a little derogatory to say that courts would side with corporations over people. That is not the experience in our courts at the moment. Our judges act judiciously. They do not side with companies or the Government over people or vice versa. They take into account what the law is, listen to the evidence and make a judgment based on that. It may not have been what the Deputy meant to say but it is rather pejorative to suggest that courts are against the people and side with corporations.
Okay, I will clarify that. National courts can act in the public interest. Investor courts act in the interests of the corporations. They are separate entities. It is apples and oranges to try to compare the two. These are special investor courts. I am not talking about a trip down to the Four Courts. I am talking about a special, separate system - the Minister knows I am - whereby our national courts can act in the public interest and do so on many occasions. These courts are separate. They are investor courts. They are separate from the normal court system. It is not fair to try to draw an equivalence between the two. My question was about whether the Minister was concerned. If it does not concern him, I want to tell him now that it concerns me.
We have other international courts, for example, the International Court of Justice, the European Court of Justice, ECJ, and the European Court of First Instance. We have many examples of non-national courts and they do what people who are involved in arbitration and who are judges should do; they take account of the law, listen to the evidence from both sides and make a fair judgment. The reason the EU wanted this included in CETA was we wanted to have protections for Irish and European companies. We need to bear that in mind as well. We want to make sure that Irish and European companies that may invest or trade in Canada are not treated unfairly and have this mechanism open to them.
Indeed, and I appreciate that is the Minister's position. In 2017, his colleague, the Minister for Transport, Deputy Ryan, described CETA as being written and negotiated by big corporate interests and their lobbyists. He said that it was wrong. The Minister clearly does not share those views but I want to go beyond the trade aspect, which is operational. The aspect that gets me every time is that much of this is already operational. As he outlined, the benefits, in as much as there are any, are already there. The Minister, Deputy Ryan, was very clear in 2017 - when he was not yet in government - to say that he believed it was wrong and that it was negotiated by big corporate interests and their lobbyists.
Beyond the trade aspect, which we have already, what exactly is it that is so beneficial? I share the Minister for Transport's view in 2017. I am interested to know. The Tánaiste clearly has significant support for this. What are the specific aspects beyond trade because that is operational? What is it exactly that he is so enamoured of?
I am not "enamoured"; I just think this is a good trade agreement that we should ratify, and should have done so ages ago. It is not my baby. I was not involved in negotiating it. I do not hold any particular candle for it. It is an agreement that is good for Ireland that should have been ratified ages ago, which would allow us then to focus on other issues of even greater importance.
I cannot speak for the Minister for Transport but I have heard his explanations as to why he has changed his position on this. Much of that relates to the judgment of the ECJ on it and the changes that were made when moving from an ISDS to an ICS.
I am sure the Deputy would say otherwise but if Sinn Féin was in government, it might have a different position on this. I imagine if that were to happen, and I am not saying it is going to happen, Sinn Féin would make sure that Ireland was not the country holding up an EU trade agreement. I imagine the party would find the mechanism to change its position on it. Hopefully, that will never be put to the test because this will be ratified long before that.
I might return to my question about details beyond the trade aspects of this deal that are operation. I apologise if the Minister disliked the use of the word "enamoured" but what exactly is it that he supports and feels we need that is so important? I am genuinely struggling with it.
There are two things. First, we accept the benefits of provisional ratification but provisional ratification cannot last forever and is open to challenge. It is, therefore, incorrect to say that we can just back the gains of this agreement and not ratify it.
The second point is the message it sends out to the world. In Ireland, up until recent years, we have had a political consensus in favour of free trade and free enterprise. Free trade is a good thing for Ireland. It creates jobs and investment. If we are the country that holds this up, it would send out a message to allies, other countries and investors that Ireland is moving away from that path and that perhaps this is not a country they want to trade with or in which to invest. I believe that would be an own goal.
No, that is not correct. It is correct that other countries have not ratified it. Most EU countries have. As a country that is pro-enterprise and pro-trade, we like to be among the first to ratify. We are not; we are laggards in respect of ratification. We are not the last to ratify. That is correct. Most EU countries have; some have not. I would prefer us to be in the advanced group. We are not. I certainly do not want us to be in the laggard group, into which we risk falling.
Cyprus had a vote in its parliament to not ratify at this time and that relates to an issue around halloumi cheese. Everyone thinks that will be resolved.
France, the Netherlands and Germany have not ratified it. I believe in the Netherlands it is because the government does not have a majority in their Senate. It is not true to say that we would be the only country that we would hold this up. There is a sense of urgency coming from the Minister and he says he wants it done as soon as possible, etc., but I do not get that this is necessary. I do not understand what is driving this. Much of it is in operation at the moment. Equally, there are countries that have not ratified it and one country has voted not to ratify it, whether it is not now or ever. I still do not understand what is creating this pressing need.
I did not say we were the only country not to ratify it. I said we were laggards because most countries have ratified it. Even some of the countries the Deputy mentioned are ahead of us. CETA has been ratified in France by their National Assembly, its equivalent of the Dáil. That was done on 23 July 2019. It now has to go to their Senate. In the Netherlands, the lower house has ratified the agreement. It now has to go to the Senate. We have not even been allowed to have a vote in our Dáil yet. I hope the Deputy will support there being a vote.
Is it the Minister's intention to hold a vote in the Dáil and the Seanad? He mentioned other countries where it was ratified in their equivalent of the Dáil but not their senate. Is it his intention to have a debate and vote in both?
I thank the Minister for his detailed statement. Some of the most common criticisms of the trade deal I have read relate to the concerns about the ICS. However, unlike investor courts established elsewhere, CETA provides for a high level of transparency around the system. It also includes an article guaranteeing the right for countries to regulate public policies and I understand these were largely introduced as a result of efforts of MEPs and activists. Will the Minister advise whether these changes are sufficient to address the concerns critics are raising?
I believe they are. Canada, like Europe, is reasonably progressive. In both, we have seen over time an increase in incomes, living standards, workers' rights and environmental protections. I do not believe either the EU or Canada will be motivated to go backwards in that regard. The protections that are there are robust.
Since the provisional application of CETA in 2017, Irish exports to Canada have increased by nearly 60%. It is pivotal that Canadian firms employ in excess of 15,000 people across Ireland. What is the Minister's view of the scope for further growth in exports and the number of Canadian firms that are here or could set up here?
The potential is considerable. Post Brexit there is an opportunity for Ireland to become a hub for Canadian investment in the Union. We are English-speaking and have a similar business culture to Canada. There is a similar culture and ethos and many links between Canada and Ireland. There is an opportunity for us to say to Canada, as we say to the US, that this is a place where it should base its European operations. There is potential for lots of exports in the food sector, in particular, from Ireland to Canada and vice versa.
I welcome the Minister to the committee. The trade deal between the EU and South Korea saved EU firms approximately €3 billion in scrapped or lowered custom duties. The CETA deal is in force provisionally. What savings are being made by Irish and EU firms with respect to the deal?
That is fine. There is reference to trade in manufacturing and services, public procurement, investment, intellectual property and sustainable development. How will small Irish companies benefit from the CETA deal?
As is often the case with FTAs, small companies can benefit the most. Where there are trade barriers, expensive customs and tariffs have to be paid and there is significant bureaucracy. A big company with a big legal department can afford to have a customs official, lawyers and so on to overcome some of those trade barriers. That is very hard for a small company. When charges and barriers to trade are removed, often SMEs benefit most.
An entire chapter of CETA is dedicated to SMEs. It is about overcoming the constraints that might otherwise limit them taking full advantage of market access. There is a CETA SME website. Both the EU and Canada launched it in April 2019. That contains a user-friendly summary of CETA, explaining how it works in businessman terms. We think there are potential benefits in sectoral areas such as financial software, telecommunications, digital media content and gaming, education, e-learning, agritech, engineering, life sciences and digital health.
I have read that CETA, as a progressive trade agreement, has some of the strongest commitments ever included in a trade deal to promote labour rights, environmental protection and sustainable development. It also integrates the EU's and Canada's "commitments to apply international rules on workers' rights, environmental protection and climate action". Will the Minister comment on those points? Is he satisfied that is the case?
It is a feature of the new generation of trade agreements that they do that. Trade agreements used to be short. They would be a couple of pages and would state there were no tariffs, barriers or whatever. Things have changed a lot. Trade agreements have become very detailed and tend to include many provisions, including provisions underpinning the rights of workers, minimum product standards, environmental protections and so on. This is a good example of the new generation of trade agreements that are not just about trade.
In trade agreements, we try to avoid renegotiating entire international agreements or conventions and, therefore, we will say the agreement has to be faithful to the Paris climate accords or to International Labour Organization labour standards. We try to integrate these protections and guarantees in the trade agreement but avoid reopening existing agreements and standards.
I received an email last night from a constituent. It looks like one of these emails that is going around. We probably get many the same ones. It made two points. One was on climate. It referred to the recent Intergovernmental Panel on Climate Change report issuing a code red for humanity, fossil fuels emissions being the main culprit and so on. The argument was made that, should CETA be ratified by all member states, we are locked into a mechanism that allows fossil fuel companies to sue is if climate action plans threaten their profits. The point was made that this is already happening to the tune of $18 billion globally under the Energy Charter Treaty. What is the Minister's view on that? Will he come back to us on that concern a constituent brought forward?
It is very clear companies cannot sue for loss of profits so that is not correct. Companies can sue if they are discriminated against and would have to prove in the courts they have been discriminated against. Again, as I mentioned, companies suing governments and government agencies is not a new thing. Companies can do that already, and vice versa, but suing for loss of profits is not provided for in CETA. A company has to prove it has been discriminated against and has been treated unfairly or differently to the way a domestic company would have been treated.
The Minister is also on record as expressing concern that the provisional agreement currently in place could be terminated if CETA is not ratified. Will he expand on those concerns given the fact that at the moment many companies in Ireland are benefiting from the provisional agreement?
I am not sure I would say "terminated" but we are saying, and our legal advice is, provisional application cannot apply forever. People understand that. Let us remember the old days of the driver's licence when someone might have got a provisional driving licence but it did not last forever. Nothing provisional can last forever; that is what provisional means. Our legal advice is that there is a concern that after the passage of time the agreement implemented so far could be challenged on the basis it has not been properly ratified. People sometimes argue that we should just bank what we have and not ratify. That is not a safe strategy to pursue.
A constituent brought up concerns with respect to housing and residential property and real estate investment trusts, REITs. Canadian-based REITs could lose some of their income and profits if we make changes to housing policy here. Investors might sue us with respect to that if they thought it was unfair. Will the Minister comment on that?
A number of Canadian property companies invest in Ireland and are funding the development of new housing. That will not change as a consequence of CETA but, again, any case that a company would take against Ireland would have to be on the basis that it is being discriminated against, treated unfairly or in a way we would not treat a European or domestic company. If we, for example, bring in a rent freeze in real terms by linking rents to inflation, that will apply to companies whether they are British, European, Irish or Canadian. No Canadian company could then say it has been treated unfairly or discriminated against. The same would apply to any public policy we may change. The point is that the companies could only take an action - and anyone can take an action about anything - be successful in the courts and get compensation if they were discriminated against and treated unfairly and differently from domestic companies.
I thank the Minister for appearing in front of the committee. It is important that colleagues look at the hard facts of this agreement rather than creating a straw man, which might have had some validity in earlier agreements. It is also important to bear in mind we are a country that exports 130% of our GDP and we are one of the most open economies in the world. We have welcomed foreign investment, including Canadian investment, on the basis of respect for the sort of principles underpinning this investor protection agreement, such as no discrimination, everyone being treated fairly and so on.
I was on the trade council and I will ask the Minister to confirm some of the memories I have of these issues. In drawing up this agreement, we bent over backwards to ensure the State's right and the citizen's right to expect government could regulate their interests in every way was protected. First, am I correct that the grounds on which a claim can be taken are restricted? They have to do with a denial of justice, a breach of fundamental due process or targeted discrimination against the company. Second, am I also correct that explicit provision was made whereby there could be no obligation to privatise, no restriction on a government bringing back into public ownership some service and no interference with the state's right to regulate? Frameworks that might impact on the profit of a company can be changed and states are perfectly entitled to do that. In addition, am I correct that there was a decisive move away from the previous ad hoc, closed system, to an open system with a panel of experienced judges from both sides to ensure this process was fair and open and an appeal mechanism was put in place?
While I understand why people have concerns about chilling effects on the State based on past experience, the facts of this agreement are particularly protective. As the Minister said, it was part of the new, progressive generation of trade agreements that recognised the need for a new settlement with globalisation. That is clear. We are shifting expectations of companies, rightly so, but this agreement protects the State's rights.
Does the Minister agree that protectionism is alive and well? Often, it is not at national level; it can be at individual state level. It is important that Irish companies are able to trade in a large country such as Canada and not find that rules in one province, or one part of the federation, are treating it unfairly. There are benefits for Ireland in having this sort of access for our companies, which cannot afford expensive court procedures in several different jurisdictions.
I thank the Deputy for his contribution. He was there when this was being negotiated; I was not so I imagine his memory is correct. He is certainly correct that there is no bar on nationalisation, municipalisation or privatisation. These are all public policy matters and are not trammelled in any way by the treaty.
On the grounds for making a claim, I will again point out companies can already make claims against states. That is nothing new. However, the grounds set out in CETA are the standard for "fair and equitable" treatment. It is:
a clear, closed text which defines precisely the standard of treatment, without leaving ... discretion to the Members of the Tribunal ...
Thus, a breach of the fair and equitable treatment ... can only arise when there is
(a) denial of justice in criminal, civil or administrative proceedings; (b) fundamental breach of due process, including a fundamental breach of transparency, in judicial and administrative proceedings; (c) manifest arbitrariness; (d) targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief; (e) abusive treatment of investors, such as coercion, duress and harassment; or (f) a breach of any further elements of the fair and equitable treatment obligation adopted by the Parties
These are the grounds on which an Irish company could take action against a Canadian authority orvice versa.They are strong protections and it is legitimate that if an Irish company was treated in that way, it should have recourse to the courts. Again, it is already the case that companies can sue states. There is nothing new about that. What is different in this agreement is that there is an international panel as an alternative to the national courts system. That is to the advantage of Irish companies, rather than dealing with nine or ten provinces with different legal systems. The reverse happens for Canadian companies in Europe that have to deal with 27 different legal systems. They have the certainty of one system that is much easier to manage.
I agree with what the Deputy said about protectionism. It is alive and well and, if anything, is making a comeback, not just in Ireland but around the world. That worries me because there is no doubt Ireland will be a net loser if we start rowing back on free trade and see the rise of protectionism again. As the Deputy mentioned, we are an export-led country.
We are not rich because of oil, gas, diamonds or gold. We are a wealthy country because of the goods and services we produce and sell abroad. We are a country that will lose out in the round if protectionism rises again and free trade is rolled back. That is why it would send a bad message for Ireland not to ratify this agreement.
I welcome the Minister and thank him for coming in and giving us the time again; the debate continues. I have been wondering about a few issues. Since this first came up, I have spent much time reading through it to try to be as fully informed as possible. I was probably starting off from a place where I did not want to support the agreement. It seems, however, that businesses will have better protections if this agreement goes through, which is a positive. This is something I have learned since coming from a place where I was dubious about it. It seems that our companies in Ireland will have better protections.
I will ask for examples because I want to put it into context for people and for myself. What kinds of goods and services are we currently exporting to and importing from Canada?
We have a climate emergency. I believe the CETA agreement is supposed to be in line with the Paris Agreement but I would not mind being reassured of that in some way. The Minister does not have to answer everything today; he cannot have all the information to hand. Those are a few things I would love to hear about from him.
I thank the Senator. I will see if my officials can get me some details on the Canada trade flows. The Senator's initial remark is correct. The protections that are in place for business are there for Irish businesses too. The bogeyman being created is this massive, evil Canadian corporation that is going to come to small, little Ireland and take advantage of us. That is a mischaracterisation. The protections that exist do so for all businesses. They exist for Irish firms operating in Canada and particularly for small firms that do not have the resources and big legal departments that the big companies have. They gain these protections as well. It is a two-way street, as trade always is. Irish firms will benefit and get the protections they need if they are mistreated or discriminated against.
Regarding the Paris climate accords, any analysis of these trade agreements would indicate that the impact on the environment is not large in either direction. What we need to do in terms of meeting our commitments under the Paris Agreement is what we do ourselves. Of course, all trade involves a degree of transport and there are emissions from that. What we need to do, however, we need to do ourselves, whether it is around decarbonising our energy systems or all the things we need to do. CETA or any other trade agreement will not have a major impact in either direction.
I confirm that I am on campus. I thank the Minister for his statement. It is much appreciated. I have found that the discourse so far has been informative. I touched on this before at a meeting of the Joint Committee on European Union Affairs but it appears that this trade agreement and its benefits to our society outweigh our right to defend ourselves via our national courts through the arbitration process noted, which is similar to the construction dispute resolution processes that are in place to speed up resolutions and reduce costs to both parties.
The Minister mentioned positive income to the State in the context of tax revenue and workers on the ground. Has his Department considered and performed a risk analysis to the State relative to this benefit and the potential litigation against us?
My Department has done a regulatory impact analysis, RIA, on the question of ratifying CETA, which addresses the issue raised by the Deputy. I will arrange for that RIA to be circulated to committee members.
In summary, as I set out in my opening statement, since the provisional application of CETA in 2017, the benefits have been plain to see, with goods exports increasing from €953 million to €1.7 billion and service exports increasing from €1.6 billion to €2.3 billion. In April this year, we released the Copenhagen Economics report on the potential economic opportunities of the four FTAs and their forecast to have a positive effect on trade, GDP, national income for Ireland, wages and consumer prices.
With regard to potential litigation costs, which the Deputy mentioned, what we are discussing here is the ICS under CETA. I reiterate that a Canadian firm can already sue the Government for alleged unfair treatment or discrimination in our courts. This would be the case whether CETA existed or not. What CETA simply provides for is an alternative to the national courts, which is an arbitration mechanism.
Regarding potential costs, it would be a hypothetical exercise to estimate what costs, if any, would arise for the Exchequer on foot of a judgment under the ICS or to say what type of discrimination would be substantiated against the State. Equally, it is not possible to anticipate the sector of the economy or the size of the company that may pursue such a claim. As I highlighted previously, however, the State has a strong reputation for observing the rule of law and we have no record of treating inward investors unfairly or in a discriminatory manner. If anything, we are accused of the opposite. I find it hard to see, therefore, how a Canadian company would use the ICS system successfully to gain compensation from Ireland. We would have to have done something to them to merit that and it would have to be something our national courts found against them on but that the ICS found in their favour. I do not see how that would arise.
It is important that we have markets for our businesses. I believe the local enterprise offices, LEO, are doing work with the SMEs, which are good, in helping them to get ready for export. It is really good that we export goods that Canada needs and that we import stuff from Canada that we cannot provide ourselves. I hope we are also looking at making ourselves more sustainable as a country in order that we only import what we cannot produce.
During Brexit, we obtained lots of good information on the number of potatoes, for example, we are importing from England. Sometimes we get garlic and such from China. I hope we move forward as a Government with the focus on making sure we can produce all we can in our country, on looking at our food miles and our carbon footprint, and, of course, at the great potential for creating jobs. We can get many more jobs on the land around food production than just dairy or beef. I hope we are also considering those issues within all these trade agreements.
There are significant opportunities for import substitution, particularly in the energy area. We spend a fortune importing oil, gas and coal from other jurisdictions when we could produce our own renewable energy, turn it into hydrogen and export it. The big vision we all shared was to turn Ireland from an energy importer into an energy exporter over the next decade.
It can be a little more complicated when it comes to goods. There are many things we could produce in Ireland that we currently import but they might be produced at a lower quality or higher cost. Often we import things because they can be produced less expensively overseas. If we produced them in Ireland, the consumer would have to pay much more for them. That would be an issue. We could produce more clothes and furniture in Ireland, for example, but it would make clothes and furniture more expensive for ordinary people. We always have to bear those kinds of things in mind.
Then we have beef, for example, which, at least, we would contend we can produce in a more environmentally sustainable way in Ireland than other countries do. We would encourage them to import our product because we can produce it more sustainably.
I thank the Chairman and the Minister. He was at pains to emphasise that companies can currently take states to court for discriminatory measures and so on. I agree that is an accurate summation of the current law. Why then is it that corporations need to have access to parallel justice mechanisms?
Why can they not just pursue issues through the national courts?
They can. They can still pursue cases through the national courts but the idea behind having an ICS is that it makes it easier and more simple for companies to get justice if they have been discriminated against. We have 27 member states in the EU with different courts systems and different legal systems, as well as courts at subnational level. It is similar in Canada. This simplifies things and makes things much easier, so if an Irish company has been discriminated against and has been unfairly treated, it can get justice in a way that is quicker and more transparent. That is the thinking behind it, particularly when it comes to future trade agreements. For example, we may do trade agreements with companies other than Canada where we are less confident that their court systems would treat us fairly and that is where an international system can be helpful.
It is a parallel justice system just for corporations. The Minister was explicit and said repeatedly that the only basis on which a Canadian company could sue the State in the ICS is if it was discriminated against. I would like him to clarify that. Is that his position?
The Minister stated on a couple of occasions the only way companies could sue is if they were discriminated against. He now accepts that is not the case. They would not have to be discriminated against on the basis of not being European to access the ICS and potentially win against the State.
They have to establish that they have been treated unfairly and inequitably. I set out in my earlier remarks exactly what those grounds are. I can go through the joint interpretative instrument as well, which explains exactly what that is. These are all forms of discrimination, in my view.
In the Minister's opening statement, which we do not have before us, he repeatedly stated that it would only be on the basis of discrimination but that is not the case. According to Article 8.12 of CETA:
A Party shall not nationalise or expropriate a covered investment either directly, or indirectly [and indirectly basically involves any sort of regulations that interfere with the right to profit] ... having an effect equivalent to nationalisation or expropriation ("expropriation"), except (a) for a public purpose;
(b) under due process of law;
(c) in a non-discriminatory manner; and
(d) on payment of prompt, adequate and effective compensation.
A Canadian company could make the case that it has been indirectly expropriated by a significant labour or environmental regulation, even if it affected all companies regardless of being Canadian or European, because it has not been compensated. Is that not the case?
No. It could certainly argue it but I do not think it would be successful making that case in any court. There is no right to profit contained in this agreement or treaty. What the Deputy has read into the record clearly sets out the grounds as to where the Government could nationalise something. That provision provides for nationalisation but it states that where nationalisation occurs, owners have to be compensated. Of course, that would be the case. Anything else would be confiscation.
The Minister was at pains to emphasise that the chances of Ireland being successfully sued by a Canadian company are low. He is presumably aware that approximately 1,000 Canadian corporations are currently taking cases in ISDS processes against states around the world. They are very much engaged in what Joseph Stiglitz described as "litigation terrorism".
That is a pretty extreme remark. People will litigate for all sorts of different reasons. Citizens do and companies do. I do not know the exact number of Canadian companies that are currently involved in litigation but as I pointed out earlier, this is happening before CETA has been ratified so the idea that ratifying CETA somehow allows corporations to litigate makes no sense. It is absurd because, as the Deputy pointed out, there are hundreds or even thousands of cases under way.
To clarify, these are all cases that are being taken in ISDS mechanisms. They are outside of the normal court process, in precisely the kind of process that is being set up by CETA. I presume the Minister would agree that the US is a state where-----
Yes, some of them are. For example, one Canadian mining company is suing Romania for almost $6 billion for interfering with its mining rights. Another corporation is suing Croatia for removing its illegal permits for a golf course. The Minister said that effectively, we will have protection-----
Yes, but in ISDS processes, not in regular courts. That is not where they are taking place. Presumably, the Minister will agree that the US is a state where there is rule of law and so on, which is one of the things he said would protect us. Is he aware that the Canada-based company TC Energy is suing the US Government in an ISDS process for $15 billion after the Biden Administration cancelled the Keystone XL pipeline project?
This is an expansion. Let me give a concrete case. IRES REIT is owned by a Canadian company. If we sign up to CETA, we may be in a position in a few years where we will say we need rent controls to bring rents down to an affordable level. If the Minister is still in government at that time - hopefully not - will he not say not only that rent controls are unconstitutional but that if we do bring them in, we may be sued for indirect expropriation by the company that owns IRES REIT in the ICS? It will be used precisely for regulatory chill, for the Government to say its hands are tied and that it cannot do something because that would be engaging in indirect expropriation. Indirect expropriation is defined broadly.
-----and would presumably have to be determined by the Supreme Court. The second question is whether there would have to be compensation in those circumstances. Any company could argue that case, not just a Canadian company such as IRES REIT. Any company could argue in such a scenario that that represents confiscation or expropriation and that case would have to be heard. Whether the company is Canadian or not is not the point.
I thank the Minister for coming before the committee. Let me be clear that I remain utterly unconvinced, as do others in my party, on the need for this alternative dispute resolution system. It is a good argument that we have an existing dispute resolution system within our domestic courts that functions well. The argument for an alternative is weak, other than on grounds of efficiency. The other important point to make is that we can be in favour of a trade deal but not in favour of this specific element of the alternative dispute resolution system. I find myself in a place where, while I believe that a trade deal can bring great positives, a number of elements within this deal are alarming.
I have two questions. The first relates to the ratification process. The Minister said that most member states have ratified the deal. According to my latest count, 13 member states have yet to ratify it. There is a certain irony there because the Government has dragged its heels when transposing some EU directives in the past but there is an eagerness on the part of this Government to try to ratify this trade deal. I want to understand what discussions have taken place at EU level about the failure to fully ratify this deal. I presume discussions have taken place. If so, what has come out of them?
The point I was making earlier is that a false argument is being put forward by some, although not by the Senator, that CETA will somehow allow Canadian companies to sue the State or State agencies. This is a bogus argument because, as we have learned from this session, Canadian companies sue states all the time. Irish companies sue states too, and vice versa, and do so in courts and arbitration mechanisms. This is just a new system for doing something that already happens and will continue to happen.
The argument is made on the grounds of efficiency, transparency and speed, which the Senator has pointed out. I believe these to be benefits.
She is correct that one can be in favour of a trade deal and not be in favour of all aspects of it. This is negotiated, however, and this is done. It is a package and it has been ratified by the European Parliament. Most other member states, 15 of the 27, which are member states further along than we are, for example, France and the Netherlands, have ratified it by their lower house as I mentioned earlier. Since I have been the Minister, there have been no discussions whatsoever at European Council level around a plan B or what we would do if it is not ratified. There is no expectation at EU level that this will be anything other than ratified. It is considered to be only a matter of time. Unfortunately, Ireland is one of the countries that is in the second half of countries when it comes to ratification and I hope that we will not slip further.
It is alarming that such a conversation has not taken place at EU level. It is important to say that it was 15 of the 28 EU member states, because the UK ratified and, of course, they are no longer part of the Union.
My other question relates to the reassurances the Government can provide with regard to the trade deal. I am aware that trade unions have repeatedly expressed concern about the so-called "negative list" that has to be set out to protect against market access. Teacher unions have talked about education. There are some of us across political parties who want to see change with regard to waste collection. What assurances can the Minister provide on this negative list if the Government ratifies? Will there be comprehensive engagement? What reassurances have the Government provided to trade unions on this specific issue?
I might come back in a moment on the negative list issue. There would, of course, be engagement on it. If the Senator can give me a little bit of time I might come back on that later in the session.
On the earlier question, I am advised that if a member state was unable to ratify CETA, and it represented a permanent and definitive state, they would have to formally notify this to the Secretariat-General of the Council prior to any action being required on the part of the Commission. If this was to happen it would be the first time for this situation to arise with an EU trade agreement and the Commission would need to engage member states with regard to the implications. The possibility however of a termination of the provisional application would then arise and that would be determined by qualified majority voting. The Union has been around for a long time and there have been a lot of trade agreements but never has it arisen that a state would permanently and definitively reject an agreement. That would put us in a difficult position were we the country to do that.
I thank the Minister for his presence here. I have just a few questions. It is important that we do everything to try to initiate greater trade with all of our trading partners. People also have the right, however, to look over it to make sure we are doing everything to protect Ireland's interests, and particularly with this new investment court system.
I have a couple of questions on the discrimination aspect of the system, which basically appears to be the main ground on which cases can be taken. If there was a breach of competition law, for example price fixing which could be seen as discriminatory, could that open the way for Canadian companies to make a claim against Ireland?
The Minister may have answered my next question. Is Ireland adopting the position that the ICS will be the preferred mechanism in future trade agreements to discuss how countries use arbitration rather than country to country as was used previously?
It was said that rules were designed to ensure access by SMEs to the tribunal but they appear to be absent, although there is a commitment by the Commission and the Council to ensure such access is provided. Have there been further assurances about this access for SMEs?
The question asked by the Deputy at the outset on the breach of competition law is valid, but it is also hypothetical. I imagine that the way it would work is that the Competition and Consumer Protection Commission, which is Ireland's competition authority, would conclude that there was a breach of competition law. If that breach of competition law harmed a Canadian company, I do not see how they would sue the State because it would be the State that had found competition law had been breached. If for some reason a State body did not follow its procedures and failed to find that there was a competition breach when there was one, if for example an Irish company was acting in breach of competition law and the competition authority did nothing about that, then the Canadian company could take the case. For this to happen it would have to be an Government agency acting illegally and discriminating against a Canadian company over a European one. I just do not think that would arise. We do not have a tradition in Ireland of discriminating against international investors. I do not believe that anyone would argue that we do.
The ICS could well be a prototype for future trade agreements. It does not exist in some trade agreements and it does in others. I believe it is in the Mexico agreement but not in EU-Mercosur, for example. It is potentially a prototype for future agreements and particularly if we are coming to trade agreements with China in the future or other economic powers. It is something we would favour as a European Union because it creates that alternative to the national courts that maybe would not have the same degree of confidence.
On SME access, part of the reason for this system is to assist SMEs. SMEs do not have big funds or big legal departments. It is hard for them to navigate different national court systems, different provinces in Canada and different member states. Having a single mechanism as an alternative to national courts would be to their advantage if they are being mistreated or discriminated against.
I thank the Minister. Does CETA allow for just compensation or would punitive damages also form part of a legal finding against Ireland in the future where a company's case was upheld in respect of trade discrimination?
Yes. Again, the case would have to be upheld. It would have to be true that the Government or a Government agency discriminated against and treated a Canadian company unfairly. It is already the case in the national courts that such a case could be taken and there could be damages, and I believe punitive damages as well as compensation. The answer to the Deputy's question is "Yes" but I will read a note into the record from my officials that might answer the question better than I did:
CETA introduces a precise and specific standard of fair and equitable treatment of investors and investment. An investor may only have recourse to the ICS in very specific limited grounds such as in the case of a denial of justice, a fundamental breach of due process or targeted discrimination, for example, on the grounds of race, religious belief or gender. None of these measures give the Government any concern that we would be subject to ICS proceedings. Investors must prove that they have been discriminated against or treated unfairly as described. They must also prove that they have suffered economic harm or loss. CETA reaffirms the EU and Canada right to regulate to achieve legitimate policy objectives and it is made clear that the agreement does not imply an expectation that public bodies will remain unchanged. An investor cannot be given compensation solely because he or she has lost profits or suffered economic loss or costs and there is no provision for the awarding of punitive damages. [I am happy to clarify that.] As such, regulation for the protection of public health, the environment, or consumer protection, for example, measures relating to plain packaging on cigarettes and minimum alcohol pricing, can continue to be introduced and it is also noted in the CETA that governments can change their laws including in a way that affects investors' expectations of profits. That would not be a breach of investor protection standards.
I thank the Chairman and the Minister. I will first reiterate my disappointment that the Minister was not prepared to share his statement before this meeting.
It is just not good practice. I believe it is disrespectful. My first question is technical. Which article of the Constitution is the Minister planning to use to ratify this treaty? Does he plan to use Article 29.5.2°, which provides: "The State shall not be bound by any international agreement involving a charge upon public funds unless the terms of the agreement shall have been approved by Dáil Éireann"?
I have to check that with the Attorney General, but I think so. I am not sure there is another one. That is the one we would use as standard; that international agreements are concluded by Dáil Éireann. The answer to the question is "Yes" because I think that is the one we always use.
I asked that question because in the Minister's opening statement, as far as I can remember because he has not given us a copy of it, he said that there would be no charge on the public funds in respect of this agreement.
In terms of the ICS there will not, because that will be paid for out of the budgets of the European Commission and of the Canadian Government. However, we accept that this treaty requires Dáil ratification.
Yes. My understanding is that it is only if the ICS case was won that it would arise. As I said, that is something I can check with the Attorney General and I am happy to do so. However, nobody is arguing that we would ratify this without a democratic vote in the Dáil. We would have to.
Then why use Article 29.5.2°, which provides, and I reiterate: "The State shall not be bound by any international agreement involving a charge upon public funds unless the terms of the agreement shall have been approved by Dáil Éireann"?
This is a constitutional legal question that I will have to check with the Attorney General. I do not want to give the Senator an answer today that turns out to be incorrect. I am happy to refer back to the Senator on that.
I am not getting many answers so far from the Minister. I think he will accept that, at least. Will he comment on the rest of Europe? A number of significant countries have not yet ratified this treaty, including France, the Netherlands and Germany. Indeed, there is no urgency at all from the French Government, which the Minister will accept is the closest government to Canada. In fact, the French Minister, Mr. Clément Beaune, said in March this year that France would not even contemplate ratifying CETA ahead of the presidential elections in 2022, such is the level of discontent in the population. Given all that, why should we rush to ratify this treaty?
It is not a rush. As I outlined earlier, more than half of EU countries have ratified this treaty. It was agreed years ago and has been ratified by the European Parliament. If we were rushing, we would be one of the first to ratify it. I would like us to be one of the first to ratify, and to be in the advance group to do so, but we are already going to be in the second half. In Germany, there is a court case, which has yet to be resolved, but I believe the state will ratify it. The Senator mentioned France. It has already gone through its National Assembly, the lower house, and it has not gone through its Senate. The French presidential elections that the Senator mentioned will be held in April or May next year, so I would read those comments as saying that France intends to ratify it some time next year, and perhaps even in the earlier part of next year.
I would not take it as straightforward at all. The fact of the matter is that there are major concerns about this treaty, and the ICS aspect of it in particular. As has been pointed out, and as the Minister has conceded, private citizens cannot use this treaty. This is a special court just for companies. When one thinks of the hurdles that private citizens have to go through before they can take a case to the Supreme Court, how is it in Irish people's interest to set up a separate court system specifically for companies?
Second, I do not understand the Minister's lack of concern. He said that the risks to Ireland of having to pay compensation in respect of this treaty are negligible. However, as has been pointed out, more than 1,000 Canadian companies are currently taking cases. What is wrong with our own court system?
I believe it is in the interests of Irish companies and firms and, therefore, will be in the interests of Irish workers and Irish people. There is nothing wrong with our national court system. As the Senator correctly pointed out, a Canadian company can already take any case it might wish to take. It is a false argument that some people are making, perhaps not the Senator, that this would open up the possibility of litigation, when that litigation happens regularly using national court systems and international arbitration mechanisms. This is just a new avenue. It is a more efficient system that will be beneficial to Irish companies operating in Canada. That is why we think it is to the benefit of people.
I can understand why people may be against this treaty, and that is fair enough. They are going to vote against it no matter when the vote is held, be it this year or two years hence. What I do not understand is the argument that somehow we should wait to ratify it last or wait until we are among the last two or three countries to ratify it. If one is for it, fair enough and if one is against it, fair enough. However, I do not understand the argument that it is somehow beneficial to drag this out or to wait until we are the last, second last or third last country to ratify it. I would love if somebody would explain that argument as to why we should defer ratification. Is there anybody on this call who is going to change his or her mind just because we are the last or second last country to do it? I believe there is a clear advantage in being one of the early countries to ratify because of the message that it sends to our Canadian allies and the message it sends about our commitment to free trade and to commerce.
To refer back to the question relating to the ratification legal mechanism, I am advised that CETA is considered to be an international agreement under Irish law, the provisions of which could give rise to a charge on the State in the future, for example, hypothetically if there was an ICS award against the State, however unlikely that possibility is considered. Were the terms of CETA to be approved by Dáil Éireann, a separate decision of the Government would then be required authorising the notification of the completion of Ireland's domestic procedure concerning the ratification of CETA to the Secretariat-General of the Council. No further Dáil approval would be required at that point.
I thank the Minister for his opening statement and his replies so far. Listening to the contributions, one would think that this is a bad thing that is happening for Ireland, but it is important to stress that this is about supporting and, importantly, protecting Irish businesses. What type of impact does the delay in ratifying CETA have on businesses the more we delay? Other members referred to other countries that have not ratified it yet. Many have ratified it, but is it not true that the ones that have not ratified it already are at a further stage than we are at present, and that we are behind them in ratifying it? I agree with the Minister in terms of having court cases and committee meetings that delay things, albeit today's debate is important. By delaying this, we are delaying protection for businesses and opportunities for businesses between Ireland and Canada. Members have referred to other countries that have not ratified it, but is it not the case that they are ahead of us in the process of ratifying it?
Yes, but it depends on the country, of course. Most have ratified and some that have not are ahead of us, such as France and the Netherlands, for example, where it has gone through their national assemblies. There are others that are at the same stage as we are or are behind us.
Has the Minister an expectation of when the Dáil motion on this will be taken following the committee meeting?
What are the downsides of not ratifying soon? Are there costs to the State associated with delaying its ratification? Have those been estimated? The further we delay, how much more cost is there to the State?
We have not set a date yet for a vote in the Dáil. We would like to do it sooner rather than later but there is no date set at this stage. Committee hearings are ongoing, as well as court cases. In the first court case the High Court found very much in favour of the Government's position but there is another court case as well. We are not sure what will happen with that or whether there will be an appeal. We wanted to allow time for committees to debate this.
The original plan by Government was to have a vote before Christmas. People asked for more time for committee debates. I am not sure if these debates will change anyone's mind. I hope they do. Maybe they will not, but we are happy to allow that to conclude to a reasonable point. I hope that when the time comes for a vote in the Dáil, Opposition parties will allow us to have that debate and vote, and not try to use any tactic or delaying procedures to prevent us having a democratic debate and vote in the Dáil on this matter.
If we were to definitively refuse to ratify this, that would precipitate a political crisis in the EU because we would be the only country to do that. That would be very much against our interests as a member state and would send out a strong message that Ireland is no longer committed to free trade and enterprise. It would be an enormous mistake on our part if we were to definitively reject a treaty that no other country has rejected.
Have other EU leaders raised the issue with the Minister? Have there been conversations between countries regarding when they hope to ratify it? Have there been any discussions or concerns among EU leaders on it?
Has the Minister spoken to or is he expecting to speak with our counterparts in Canada? I note a new government will be formed in Canada as well. Will there also be discussions there?
I have had conversations with other Ministers about this. I imagine we will be in contact with the new Canadian Government when it is established but it looks like the new Canadian Government will be the same as the previous one. They would be very much urging us to ratify this and are big supporters of the agreement and want closer ties with Ireland and the EU.
With regard to discussions at EU level, it barely features at Trade Council. I am sure it has come up on the side. It is there in documents but I have not heard any substantive debate about CETA at the EU trade Council because the expectation is that this will be ratified. It was negotiated and agreed years ago and ratified by the European Parliament already. Most member states have ratified. No member state has rejected it. I note Cyprus has done what it has done but it has not rejected it definitively. There is nobody talking about a plan B, a renegotiation or a what if. We would throw a spanner in the works if we were to decide that we were to be the only country to definitively reject it.
I thank the Minister. Finally, sometimes we forget the benefits that this trade agreement with Canada brings to Ireland. Can he elaborate on that, and on the fact that small businesses in regional areas outside of Dublin and Cork will all benefit from this? These trade agreements are not only city-based. They have a significant impact on small and medium-sized businesses throughout Ireland. Can the Minister elaborate on the advantages and benefits that will bring once this is ratified by Government?
We are seeing many of the benefits already such as a 78% increase in exports of goods to Canada and a 44% increase in service exports. That is benefiting Irish jobs and businesses. It is increasing tax revenues to fund our public services, and that is only getting started. There is an opportunity to build on that, particularly for SMEs. As I mentioned earlier, when the rules of trade are clear, when there are fewer taxes, charges, customs and barriers, and when legal systems are clear, that benefits them more than the bigger companies with the bigger resources. We are only getting started in terms of the potential of this agreement.
Canada is a market of 38 million people. It is not as large as other markets. This is one of many trade agreements that we have made. I mentioned South Korea, Mexico and others. There will be more in the future. It is not as big as Japan, for example. I am only stating the obvious here. It is a country that we can have successful trading relations with building on what is there, and the fact that we have this similar culture - English speaking - is an advantage for us within the EU.
I thank the Minister. The next member who has indicated is Deputy Paul Murphy, who has seven minutes. He will be followed by Deputy Louise O'Reilly, who will have seven minutes. I ask anybody else who wants to contribute, because there is time, to indicate.
I want to explore further what regulatory chill looks like in reality and what it will mean for people as opposed to it all being highfalutin treaties and the ICS. To take a current issue which is data centres, we may have electricity blackouts this winter. Electricity prices are going through the roof, primarily because of international factors but also because the data centres currently use 11% of all the electricity produced in this country. By the end of the decade, that will be up to 30% and counting. In the event that CETA is ratified and that a Canadian company is seeking to build a data centre in Ireland, and, let us say, Government policy changes in line with People Before Profit's Bill and we say there will be no more data centres as that is unsustainable, is it not the case that such a company could sue the State though the ICS for "indirect expropriation"? Let us say that they bought the land, they are preparing to go and then we say there will be no more planning permissions for data centres, they could take us to the ICS.
It is always the case that somebody can sue if he or she feels that he or she has been subjected to expropriation or confiscation. If that were to happen now, potentially, any company - an Irish company, a Canadian company or a company from Sri Lanka - could sue. They would do so through the national courts or through existing mechanisms. This is just a new mechanism, and one that we believe is fair, transparent and more efficient.
I do not know whether the Minister is being deliberately obtuse about the difference between national courts and ICS. Does he accept that there is a substantial difference in that the national courts rule on the basis of Irish and European law, which can be changed by different parliaments and governments being elected, and even the Constitution in our case, but the investment court system that will be set up under CETA will not be subject to democratic change? The ICS will simply interpret the terms of CETA. I outlined the very broad definition of "indirect expropriation". Does the Minister accept that is a fundamental difference? It is not all the same - national courts and the ICS. There is a fundamental difference between the two.
I am not saying it is all the same. Where there is an international agreement or treaty, it is standard that there would be a mechanism for adjudicating disputes where they occur. We have the European treaties and, therefore, we have the ECJ and the European courts. We have international courts and when it comes to any international treaty or agreement, we tend to have some form of arbitration or mechanism to settle a dispute. In that sense, it is not something new or fundamentally different. I accept that the ICS is different from a national court but it is not fundamentally different to what exists under any number of international agreements or treaties where there is a court or a dispute resolution mechanism.
There are plenty of bad ISDS mechanisms. There is no question about that. That is where the 1,000 Canadian corporations are taking these cases worth hundreds of billions of dollars. They have been widely criticised. There is no question that these exist but this is a new development in respect of the EU and Canada. As has been said repeatedly by the Minister and others, this will be the model. It continues the same bad practice of a parallel justice system that only corporations can access. That is the fundamental point. It is not subject to change by democratically elected politicians. It is simply that we have this agreement and that is what they will implement.
Rather than having parallel justice systems for corporations, they and individuals should be able to take cases, as it is possible to do now, which the Minister has stressed repeatedly, in national and European courts. We do not need a special corporate courts process.
The false impression being created, and I see this in the emails that I and other Deputies receive, is that ratifying CETA will for the first time, somehow, allow Canadian and other foreign companies to sue the State and State agencies for discrimination. As the Deputy pointed out, however, that happens all the time. There are hundreds of thousands of cases, so there is no change in that regard. In addition, the argument being made and the idea being created is that, somehow, an ICS is something new and that this is a new departure; it is not. Many of these mechanisms exist and are in operation.
That Ireland is not subject to, however. The Minister said, "There is no change in that regard". Again, I bring him back to the point that he is trying to deny that there is a fundamental difference between a national court process, which anybody can access, and a parallel court process that is only accessible to investors and corporations. There is a fundamental difference, but he is very much at pains to suggest that this is all the same.
After he had said that he accepted that it is not all the same, he then stated, "There is no change in that regard". If we ratify CETA, Canadian corporations will be able to sue us in a private administrative tribunal, called an investor court system, that they cannot sue the State in now. That is a fundamental difference. It is the difference between IRES REIT taking a case against the State in an Irish court, where we, as elected politicians, decide democratically what the laws are and decide to change them, compared to the ability of such a company to sue the State in a private tribunal.
No, what I was saying is that there is a difference between an international court and arbitration panel on one hand and a national court on the other. However, I am also saying that when it comes to international treaties and agreements, it is fairly standard and commonplace to have international courts and international arbitration mechanisms. This situation is no different. It is not a new departure in that sense.
The Deputy keeps saying that I have said it is the same, but I did not. What I am saying is that where there are international agreements and treaties such as the EU-UK Trade and Cooperation Agreement, TCA, that we completed with the United Kingdom, for example, and the treaty on the protocol, it is necessary to have some sort of mechanism to adjudicate disputes. That is where international courts and international tribunals come in. This mechanism is in that vein. I am not saying it is the same. I never said it was the same.
The implication that some people are suggesting, though, is that somehow the ratification of CETA will for the first time allow Canadian companies to sue the State or to take us to court for discrimination. That is not the case and it is a false argument-----
If the Deputy read the emails that other Deputies are receiving in their inboxes from constituents concerned about this issue, he would see that somebody has clearly and deliberately given those people the wrong impression. Those correspondents think that for the first time it is going to be possible for companies to sue the State. That is not the case. This has been the case since companies and courts began-----
Returning to the ongoing discussion, I am struggling with this aspect as well. As it stands, Canadian companies can sue the Government in the national courts, as can citizens, etc. However, these proposals allow for separate systems, the likes of which we have not signed up to previously. We have not signed up to anything like this proposed system. In that respect, therefore, the Minister will have to accept that this is something of a new departure. It is not the same process as the national courts because it is not open to everybody. It is only open to these large multinationals and corporations. It is a special corporate court and it is not open to citizens.
It is different to anything that exists now, or am I picking this up wrong? Can the Minister give us an example of something that is the same as the ICS? I ask because this is the aspect that people are concerned about. I am not going to tell him what to do, but I would not infer that people are somehow not capable of understanding this aspect. I think people understand it and they are not glibly writing emails to their elected representatives. People have engaged with the issue and, where they have a concern, they raise it. They are perfectly entitled to do that. I would not dismiss that, and I encourage the Minister not to do so either.
Regarding the specifics of the ICS, where and what are we now signed up to that is the same as this proposal? When people say that this is a new departure, that is, effectively, the case because this would be a new space for us to go into. We can argue the merits and demerits of doing that, but we must first accept that what we would enter into would be a new space. It is a separate and parallel process. It is not the same as our national courts, because, as was said, the national courts can act in the public interest. The ICS is not the same. It is an additional system that is available only to corporations. We are not signed up to anything that is the same as this proposed system. However, if there is, then I would like the Minister to tell us what it is so that we can go and engage with it.
I thank the Deputy. People are capable of understanding the issues, but, unfortunately, sometimes they are misled. Some people genuinely believe that ratifying CETA will mean that for the first time it will be possible for Canadian companies to sue the State. That is not true. Many things have been put out there that are not true. People are being told that it will be possible to sue for loss of profits. Again, that is not true. Unfortunately, therefore, some people at least are being misled regarding what CETA is all about. Frankly, that is wrong and shame on those who would engage in misleading the public in any form. This is an additional system, as the Deputy described it. I agree with that description of it as an additional system. However, it is not new or unprecedented to have international panels and transnational courts. The ICS will only look at the terms of CETA and it cannot challenge domestic law, which must be taken by the ICS tribunal as a fact. Perhaps that answers the question previously asked by Deputy Murphy. The ICS is only there to adjudicate on CETA and the system cannot be used to challenge a domestic law. That must be accepted by the ICS tribunal as a fact and it can only look at whether the terms of CETA have been breached.
Turning to the broader issue, international trade agreements are not part of domestic law and that is why separate adjudication arrangements are required where disputes may arise in such contexts. All international trade agreements have dispute resolution arrangements. Moreover, where such agreements cover investment rules and protections, there must be a dispute resolution mechanism to cover investments. An example would be an ISDS mechanism, which was the original plan under CETA. Irish companies investing in Canada have only one legal system and one constitutional framework to navigate should they believe that they have been discriminated against. In contrast, Canadian companies investing in Europe are faced with 27 legal systems and constitutions to navigate. ISDS systems have existed since the 1950s and they enable overseas investors to resolve disputes with the government of the country where the investment is made through binding international arbitration. ISDS mechanisms have been included in more than 2,000 investment treaties to date. The mechanism proved controversial in recent times, and it is now regarded as outdated by the European Commission.
The Government considered the fact that the European Commission was to seek to address the concerns raised by NGOs and others regarding the ISDS system in the context of the Commission trying to develop a new replacement mechanism - the ICS - to address concerns regarding transparency and the legitimacy of the public interest. Therefore, what is worth pointing out here is that the original mechanism proposed was an ISDS system. We have loads of those already. The concept is part of 2,000 investment treaties. We are not party to all of them, but we are party to some of them. The investment court system is designed to be an improvement on the ISDS system and to be more transparent, more legitimate and more in the public interest. Other people, who objected to CETA earlier, did not like the ISDS system. We have tried to respond to those concerns by coming up with a better system.
Designed to be responsive to whom is what we must be clear about. The Minister has repeatedly said that he does not think that anyone will have a change of mind on this issue. However, I always come to committee meetings with an open mind. I like to have my opinions confirmed, though, and that has happened this morning.
SMEs are the backbone of the economy in respect of employment, etc.
The Minister cited an increase of 78% in exported goods and of 44% in services. Will he give us a breakdown of those figures between large companies and SMEs and outline the benefits flowing from these increases?
I do not have such a breakdown. I am not sure if one is available but, if it is, we will provide it for the Deputy. The business groups that speak on behalf of industry, including large and small companies and SMEs, favour the ratification of CETA. They have made that clear.
Indeed, but it is a bit disingenuous for the Minister to say that he believes there will be a benefit for SMEs if the trade aspects are in place and being utilised at the moment, as we have established. If he does not have the figures to hand, that is fair enough, but he should not say that there will be some kind of benefit for SMEs if he does not know that.
We do know that. I am certain that some of the 78% increase in goods exports and the 44% increase in service exports relate to SMEs. I cannot give the Deputy the exact figure but if we can identify it, we will.
Come on now. The Minister is citing a benefit and saying that this is a good thing but he does not know that this is going to be a good thing for SMEs. He is speculating. That is fair enough but it is only speculation; there is no hard evidence. If he has such evidence, I would be grateful if he would share it with us.
The Minister said that he was going to consult the Attorney General. I understand the issues around such advice but if he would, in some way, shape or form, share the views of the Attorney General on the matter, that would be helpful.
I will, absolutely. I am sorry if I did not answer that question clearly, but when it comes to which article of the Constitution we use to ratify a particular treaty, it is a question on which I would be guided by the Attorney General. It had not come up in any debate I have been involved in prior to now. I will certainly check into it.
I will not even take the three minutes. I will just make two points. On the question of SMEs, Canada is one of the target markets for Enterprise Ireland, the support agency for SMEs. I was on trade missions to Canada with small and large producers in the whiskey and food sectors. These are the backbone of the SME sector and they were trading and looking to use this agreement. What people are also missing is that these trade agreements also bring benefits to workers. When countries are recalcitrant about providing workers' rights or environmental rights, these agreements provide an instrument through which those rights can be enforced. It is all on the downside but these agreements bring benefits for workers and environmental standards and that needs to be recorded.
It is good to have a debate but I find some of the arguments against the trade agreement quite simplistic and polarising. I am looking for a good debate on it but members are almost suggesting that we want to ratify this because we want big evil corporations to be able to sue our country and that we do not care about SMEs. It is way more nuanced than that. We should be able to have a proper intelligent debate in which we are challenged and in which questions are asked as opposed to using oversimplifications and negative insinuations that the Government wants to ratify the agreement because we are happy with our country being sued by evil corporations. If we are going to have a good debate, it should be based on some intelligent rhetoric as opposed to polarising, oversimplified arguments. I do not find it educational or informative in any way.
I have a quick question. The Minister has made reference to exports to Canada. Does he have information on the import flows that have resulted from this agreement with Canada since its enactment or on the trajectory of imports of goods and services?
We do. I will get them for the Deputy. There has been an increase in two-way trade. I will see if I can find the numbers. They were in the Copenhagen Economics report. I am just trying to find the piece of paper.
Some €1.9 billion worth of goods and €2.3 billion worth of services went out. Those goods figures are for 2020 and the service figures are for 2019. We do not have the service figures for 2020 yet. We do not have the Canada figures to hand but we will get them to the Deputy if we cannot find them in the next couple of minutes.
I thank the Deputy and everybody who has contributed. I also thank the Minister for coming in for consideration of this matter. Three members raised matters that he is to come back on. Senators Sherlock and Gavan asked about trade unions and Deputy Shanahan asked a question just there.
I sincerely apologise for that again. I will make sure the committee gets my statements in future. I will also just mention that we are waiting on the pre-legislative scrutiny report on the employment permits Bill. We are keen to get on with that legislation but we do not yet have the report from the committee. It is delaying us.
We will come back to the Minister on that. We just circulated it to members for their final comments recently. As soon as these come in, we will sign off on the report and get it back to the Department in a couple of weeks.
That is no bother. I thank the Minister again for coming in and assisting the committee in its consideration of this matter. The meeting is now adjourned until Wednesday, 29 September, when we will carry out pre-legislative scrutiny of the control of exports Bill 2021. I thank all of the members and the Minister for participating in the meeting under the exceptional circumstances we have to deal with as a result of Covid-19. It is hoped that, while the next meeting is scheduled to be held under the same conditions, there might be further relaxation of Covid restrictions before then.