Written answers

Wednesday, 20 January 2021

Department of Enterprise, Trade and Employment

Trade Agreements

Photo of Jennifer WhitmoreJennifer Whitmore (Wicklow, Social Democrats)
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10. To ask the Minister for Enterprise, Trade and Employment if his Department will carry out a risk assessment analysis on the legal, regulatory, economic and environmental implications of Ireland signing up to the remaining elements of Comprehensive Economic and Trade Agreement, CETA, including the investor court system; and if he will make a statement on the matter. [2332/21]

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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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.

Provisional application is a standard mechanism provided for in the EU’s Free Trade Agreements. This means that those areas where the EU has full competence may be applied immediately once the Agreement has been voted for by Council and the European Parliament. It is an important mechanism that allows consumers and companies to benefit from a trade agreement at an early stage, as the completion of national ratification procedures across all 27 Member States can take several years. The provisions in force since 21st September 2017 include:

- the elimination of tariffs on almost all key exports,

- access to the Canadian procurement market,

- the easing of regulatory barriers and

- more transparent rules for market access.

The full coming into force of the Agreement once ratified across all Member States, will see the implementation of the Investment Chapter of the Agreement including the resolution of disputes between investors and states, should they arise.

All international trade agreements have dispute resolution arrangements. Where such agreements cover (i) trade in both goods and services and (ii) investment rules and protections, then there must be a 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 old Investor-State Dispute Settlement or ISDS mechanism.

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. ICS is the Investment Dispute Settlement system incorporated in CETA.

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; and

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

It is important to remember that a Canadian firm can seek to sue 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.

Irish companies investing in Canada have only one legal system and one constitutional framework to navigate should they believe they have been discriminated against. In contrast, Canadian companies investing in Europe are faced with 27 legal systems and constitutions. The Investment Court System provides a single, consistent mechanism where investors, be they Canadian or European, can seek redress.

It is also important to point out that CETA reaffirms the EU and Canada’s right to regulate to achieve legitimate policy objectives, such as the protection of public health, the environment or consumer protection, meaning measures relating to plain packaging on cigarettes, or minimum alcohol pricing can continue to be introduced. 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.

Additionally, as one of the first “new generation” EU Free Trade Agreements, CETA contains a dedicated chapter on Trade and the Environment. The Agreement has some of the strongest commitments ever included in a trade deal to promote labour rights, environmental protection and sustainable development. CETA integrates the EU's and Canada's commitments to apply international rules on workers' rights, environmental protection and climate action. These obligations, which came into force at the time of provisional application are binding, with the same legal value as any other provision. Furthermore, the Agreement includes commitments towards the sustainable management of forests, fisheries and aquaculture. It also reinforces the Parties' commitments to multilateral environmental agreements to which it is a party, including the Paris Agreement, which is an important shared responsibility for the EU and Canada. Both sides also agree that more trade and investment should not be at the expense of environmental protection and labour rights. On the contrary, the EU and Canada are committed to ensuring that CETA helps ensure that economic growth, social development, and environmental protection go hand in hand.

The EU Commission published a Trade Sustainability Impact Assessment relating to the negotiation of CETA in June 2011. This study provided a comprehensive assessment of the potential impacts of trade liberalisation under CETA. The impact analysis assessed the economic, social and environmental impacts in Canada and the European Union, in three main sectors, sixteen sub-sectors and seven cross-cutting issues. In addition to examining potential gains from removing factors affecting the free flow of goods, services and capital, consideration was given to areas such as labour mobility, government procurement, intellectual property rights, telecommunications services and electronic commerce. Overall the impact assessment found that the sustainability impacts to Canada and the European Union would not be significant.

At a national level, my Department has commissioned econometric modelling on the impacts of CETA. Analysis to date estimates that Ireland’s GDP will be 0.2 percent higher in 2030 than would have been the case in a baseline scenario without CETA. It also finds total global exports from Ireland will be 0.7 percent higher in 2030 as a result of CETA. In addition, the current modelling estimates that, given that existing average tariffs on exports to Canada are relatively low (0.3% weighted average), the main benefits for Irish exporters stemming from CETA arise from a 10 percent reduction in non-tariff barrier costs on Ireland’s exports to Canada.

The combination of export-led growth and foreign direct investment has transformed Ireland’s economy over recent decades. As a small, open, economy, Ireland has benefitted immensely from our export orientated enterprises trading across the globe and, therefore, we fully support balanced international trade and the collection of EU Free Trade Agreements that seek to underpin this. This Agreement and the EU's other Trade Agreements are key instruments to assist the work of Enterprise Ireland in supporting Irish Enterprise in global markets. Moreover, the Investment Protection elements of CETA make the EU - and Ireland - a more attractive location for mobile Canadian FDI and also affords protections for Irish-based enterprises investing in Canada as part of their internationalisation.

In September 2017, Belgium requested the opinion of the Court of Justice of the European Union regarding the compatibility of the ICS with EU law. 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 equal treatment and of the requirement of effectiveness 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.

In conclusion, I believe that the foregoing assessments have already made a strong case as to the benefits for the EU and Ireland deriving from CETA. Furthermore, the EU produces an FTA Annual Implementation Report which identifies progress with FTA deliverables and which can inform further actions if required. Finally, the European Commission has recently appointed a Chief Trade Enforcement Officer who is tasked with overseeing effective implementation and observance of commitments in our list of EU FTAs, including CETA.


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