Written answers

Wednesday, 13 January 2021

Department of Enterprise, Trade and Employment

Comprehensive Economic and Trade Agreement

Cormac Devlin (Dún Laoghaire, Fianna Fail)
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19. To ask the Minister for Enterprise, Trade and Employment the position regarding the investor-state-dispute-settlement mechanism of the Comprehensive Economic and Trade Agreement between the EU and Canada in view of the recent ECJ ruling on the issue; and if he will make a statement on the matter. [44728/20]

Cormac Devlin (Dún Laoghaire, Fianna Fail)
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20. To ask the Minister for Enterprise, Trade and Employment the projected economic impact of the State ratifying the Comprehensive Economic and Trade Agreement between the EU and Canada; and if he will make a statement on the matter. [44729/20]

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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I propose to take Questions Nos. 19 and 20 together.

The EU-Canada Comprehensive Economic and Trade Agreement, commonly known as CETA, is one of the EU’s new generation of progressive free trade agreements. CETA is designed to benefit EU and Canadian companies through improved trade flows in support of increased employment for our citizens. The elimination of tariffs, reduced trade barriers and simplified customs procedures that flow from CETA all make it easier and cheaper for Irish companies of all sizes to export to Canada and vice versa. Outside of Europe, the US and China, Canada is our largest indigenous export market with more than 400 Enterprise Ireland clients doing business in the Canadian market employing over 6,000 people.

Diversifying trade is an important part of our Brexit response and it will be an important factor in our recovery post-pandemic. To this end, the best way to achieve export growth and market diversification is by improving market access and reducing costs of entering those markets which is what CETA is designed to achieve. Given our historic ties with Canada, Ireland’s enterprises are particularly well placed to benefit from CETA.

The main benefits for Ireland in this Agreement include:

the opening up of public procurement markets in the Canadian provinces giving Irish firms increased access to Canadian public sector purchasing;

unlimited tariff-free access for most of our important food exports;

a low beef import quota from Canada to the EU thereby safeguarding our important EU market in this area; and

the recognition of product standards and certification, saving on ‘double testing’ on both sides of the Atlantic.

Furthermore, the benefits and opportunities to business in the Agreement will be especially valuable for SMEs, given that trade barriers tend to disproportionately burden smaller firms, which have fewer resources to overcome them than larger firms. Indeed, CETA contains an entire chapter exclusively dedicated to SMEs aimed at ensuring they can take full advantage of the improved market access.

In services and investment, CETA is the most far-reaching agreement the EU has ever concluded. Almost half of the benefits anticipated from CETA are expected in the services sector where CETA makes it easier for EU individuals and companies to provide services to Canadian customers and vice versa. It covers services such as legal, accountancy, transport and telecoms and there are significant opportunities for Ireland given its strengths in services, with services exports accounting for approximately 60% of all exports in 2019.

CETA has provisionally applied across the EU since the 21st September 2017 which has allowed us to see the practical benefits of this Agreement. Exports of Irish goods and services to Canada totalled approximately €3.9 billion in 2019 a 35% increase compared to 2016, the last full year, prior to the provisional application of CETA. Furthermore, the cost of service barriers to trade will, on average, be reduced under CETA by 10 per cent in Canada and by 4 per cent in the EU. The benefits and opportunities to business in the removal of non-tariff barriers to trade (NTBs) - in areas such as regulatory co-operation, trade facilitation measures, streamlined administration etc., will directly benefit Irish consumers.

To date, 15 Member States have signalled to the General Secretariat of the Council of the European Union the completion of their respective national ratification procedures while several other Member States are currently progressing approval of the Agreement. Ireland, like many Member States, was awaiting the opinion of the Court of Justice of the European Union (CJEU) regarding the compatibility of CETA with EU law prior to our commencing the formal ratification process for Ireland.

The Opinion of the Court in Case 1/17 was issued on 30th April 2019 and held that the dispute settlement mechanism in CETA is compatible with EU law and complies with (i) the principle of autonomy of EU law and the exclusive jurisdiction of the CJEU for the interpretation of EU law, (ii) the principle of autonomy of EU law and the exclusive jurisdiction of the CJEU for the interpretation of EU law, and (iii) the Charter of Fundamental Rights, in particular of the right of access to a court and right to an independent and impartial tribunal under the Charter. The Opinion of the CJEU, allowed Member States to proceed with domestic ratification, according to the requirements of their national law.

International trade agreements are not part of domestic law so this is why separate adjudication arrangements are required in the event of disputes under the Agreement. All international trade agreements have dispute resolution arrangements. Moreover, where such agreements cover investment rules and protections, then there must be a dispute resolution mechanism that covers investments e.g. Investor State Dispute Settlement (ISDS).

ISDS which has been in existence since the 1950s, enables overseas investors to resolve disputes with the government of the country where their investment is made through binding international arbitration. ISDS has been included in more than 2,000 investment treaties but has proved controversial in recent times and is now regarded as outdated by the European Commission. In this regard, the Irish Government considered the European Commission was right to seek to address the concerns raised by NGOs and others regarding ISDS in seeking to develop a new replacement mechanism – the Investment Court System (ICS) – to address concerns on transparency, legitimacy and public interest - and ICS is the Investment Dispute Settlement system incorporated in CETA.

Investors may utilise either national courts or the ICS, but cannot "forum-shop". Equally, it is important to remember that a Canadian firm can seek to sue the government for alleged unfair treatment or discrimination in our Courts whether CETA exists or not. CETA simply provides an arbitration alternative. That alternative, unlike a challenge in the Courts, cannot find any act by Government to be ultra viresor unconstitutional - it is only concerned with redress for proven harm.

ICS addressees the concerns around the old ISDS system through:

- Greater transparency – hearings will be open and comments available on-line, and a right to intervene for parties with an interest in the dispute will be provided;

- Safeguards to prevent forum-shopping;

- Provisions for the swift dismissal of Frivolous claims should they arise;

- The maintenance of a clear distinction between international law and domestic law;

- The avoidance of Multiple and parallel proceedings in the ICS and National Courts, and;

- The establishment of a permanent list of arbitrators.

The reforms to investment protection mean the ICS will involve:

- a public Investment Court System composed of a first instance Tribunal and an Appeal Tribunal;

- the establishment of a permanent list of arbitrators with qualifications – comparable to those required for the members of permanent international courts, from which members will be selected to hear individual cases.

- precise limitations on the ability of investors to take a case before the Tribunal.

Under CETA the right of EU Member States (and Canada) to regulate for public policies (e.g. in health, environment, security) is fully preserved, and it is made clear that the deal does not imply an expectation that public policies will remain unchanged. Further, an investor’s loss of profits will not be sufficient grounds for making a claim against a Government. Any claim must be based on discriminatory and unfair treatment.

Finally, Ireland has been a beneficiary of significant levels of Foreign Direct Investment or FDI for many decades with more and more Irish enterprises also making overseas investments in key markets in recent years. An Investment Protection Agreement, such as the ICS model in CETA, is, therefore, a key plank of assisting in the ongoing free-flow of mobile FDI making the EU and Ireland a more attractive location for mobile Canadian FDI than other Third Countries where Canadian Investors would not have available to them the protections that such an Agreement provides.

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