Is mór an onóir dom a bheith i láthair libh agus cuireadh a bheith agam chun labhairt leis an gcoiste seo fiú más trí nasc físe amháin é. I am afraid I had to look up the word for "video link"; it was not in the dictionary when I was studying Irish.
It is a great pleasure and honour for me to be able to contribute to the committee's work on reflecting on the trade agreement with Canada. I thought it might be helpful if I put the CETA debate in the broader context of EU trade policy. I was the director-general for trade in the European Commission from November 2005 until November 2010, and I have continued to follow trade matters closely in my subsequent roles, most recently as EU ambassador to Washington.
During my time as director-general, there was a considerable evolution in EU trade policy. Initially, all our energy was focused on trying to make a success of the World Trade Organization, WTO, negotiations launched in Doha in 2001. We even placed a moratorium on the negotiation of new bilateral trade deals in order to underline our commitment to the multilateral process. However, by 2006, it was becoming clear that the Doha round might not succeed and other trading partners such as the US were restarting bilateral deals. The EU decided to launch three sets of bilateral deals with South Korea, India and the Association of Southeast Asian Nations, ASEAN. The deal with South Korea was concluded in 2010 and I had the pleasure of presiding over it. The search for a region to region deal with ASEAN was abandoned in favour of a series of bilateral deals, leading to free trade agreements with Vietnam and Singapore. The negotiations with India, initially promising, were, unfortunately, never concluded.
In 2008, after the collapse of the Doha development agenda, even more bilateral negotiations began, and, today, the European Union is at the centre of the largest free trade network the world has ever seen, with 44 agreements covering 76 countries, representing 33% of total EU trade flows. Negotiations are currently in hand for free trade agreements with Australia, New Zealand, Indonesia and the Philippines. A deal has been reached with Mercosur, the South American customs union, which awaits a formal Commission proposal to the Council and Parliament for possible signature.
It is important to underline that these new trade deals were intended to be significantly more comprehensive than previous free trade agreements. They sought to cover nearly all goods, significant chunks of trade in services, regulatory matters and sustainable development issues, such as environmental and labour standards.
This was part of a broader trend of recognising, on the one hand, that non-tariff barriers can be as significant, if not even greater, barriers to trade than tariffs and, on the other, that trade agreements needed to address a wider set of level playing field issues, a term that has become well known in Ireland because of the negotiations on Brexit. This is both to ensure equity of trading terms and that FTAs would be a vehicle for mutually enhancing core regulatory standards to be agreed with our trading partners.
Canada was seen as an excellent test partner for this next-generation FTA because its own international trade policy had for some time sought to incorporate a broader range of issues, the case for mutual economic benefits from reduced barriers was a good one, and this has been borne out by the results of the provisional application, and because Canada was the type of like-minded partner with which the EU expected a productive dialogue. Following an exploratory period in 2007 to 2008, formal talks with Canada were officially launched in 2009. The negotiations were concluded in August 2014. After approval of the text by all member states, it was signed in 2016. The European Parliament gave its approval for the deal in February 2017. Canada ratified the Comprehensive and Economic Trade Agreement, CETA, in May 2017.
In parallel, a strategic partnership agreement, SPA, was negotiated and it was signed in October 2016. This reflects the fact that the EU conceives of a deepened FTA relationship not as purely economic, but as an opportunity to deepen relations with the partner across the board. The strategic partnership agreement upgrades the framework of co-operation between the EU and Canada and expands the basis of the relationship, in parallel with what we are doing to foster trade and investment through CETA. The agreement enshrines our shared democratic values and enhances political dialogue on a broad range of areas, including international peace and security, economic and sustainable development, justice, freedom and security.
Since both agreements contained elements considered of mixed competence, ratification by each member state individually is required, a process which can normally take several years to complete. The SPA entered into provisional application in April 2017. In order not to delay the benefits of the trade deal, it was agreed, provisionally, to apply matters of EU competence in CETA from September 2017. In practice, this is probably 90% of the deal with the exception of portfolio investment and the investor court system. This means that, in particular, most of the trade improvements have been in force since then, leading to a significant increase in trade in both goods and services. For Ireland, bilateral trade has increased considerably as a result of the virtual elimination of tariffs. Trade in goods alone between Canada and the EU was worth €59 billion in 2019. Ireland’s trade in goods with Canada reached €2 billion in 2019, an increase of 37% compared to pre-CETA trade. Ireland has a positive trade balance of nearly €1 billion with Canada, consisting mainly of chemicals, pharmaceuticals and agrifood products, particularly beverages. Services exports at nearly €2 billion have increased by 17%.
It is useful to reflect a little on what provisional application means. Until the European Court of Justice judgment on the Singapore FTA in 2017, it was always assumed that the presence in any trade deal of even minor issues relating to mixed competence or exclusive member state competence required ratification by each country individually. This process typically involves more than 40 parliaments, including those with bicameral systems as well as federal systems such as that of Belgium, which has seven parliaments that have to ratify. I will not hide the fact that this caused considerable bewilderment from our trade partners who had to negotiate with the Commission, backed by the member states, secure signature via unanimous approval of all countries, secure the approval of the European Parliament and then still await formal ratification by all national parliaments. The assumption had always been, and this has been the case until now, that given the rigorous scrutiny process needed for Council and European Parliament approval, ratification by national parliaments would be largely automatic. National parliaments cannot renegotiate the texts and, therefore, are faced with a relatively binary choice, to accept or to reject. They have that choice.
Provisional application was the technique developed to ensure that at least the trade benefits could be applied pending the final outcome of this sometimes lengthy approval process. It is decided by the Council upon a proposal from the Commission and can only cover those aspects of the agreement fully within EU competence. On this issue of exclusive versus mixed competence, a few years ago the Commission decided to test the assumption about exclusive versus mixed competence before the European Court of Justice. It submitted, as a test case, a draft FTA with Singapore and asked the court whether it could not be considered as a matter of exclusive competence, notwithstanding the presence in the deal of certain elements of mixed or national competence. The court found in a judgment in May 2017 that the Singapore deal as such needed national ratification, but laid down principles which opened the door to crafting trade deals in such a manner as only to need ratification at EU level, that is, a vote of the Council of Ministers and a vote in the European Parliament. Based on this judgment, it is my view, and I believe others would share it, that it is highly likely the Canada deal, with the exception of the investment chapter, if presented today would not need national ratification, as was the case for the recently concluded EU-UK Trade and Co-operation Agreement. However, the Canada deal, as concluded in 2017 and already ratified by Canada, does require full national ratification. This is why the matter is now before the Oireachtas.
Chairman, I will say a few words about the issue of investment because this is one of the elements of controversy in this agreement. The Lisbon treaty, which entered into force in December 2009, added investment to the coverage of the trade competence of the EU in Article 207. Since the emergence of bilateral investment treaties in the late 1950s, member states had concluded many such agreements. There were hundreds of bilateral investment treaties between member states and third countries. It was decided to grandfather all these agreements on the understanding that they would be progressively phased out as EU deals took their place. This required the Commission to negotiate investment chapters granting member states equivalent protection to that prevailing in the bilateral treaties. Notably, it included a system of investor-state dispute settlement, ISDS, which was designed to give European investors protection from arbitrary or discriminatory treatment by host governments of their investments outside of the EU via a system of independent arbitration.
The inclusion of such provisions became a major point of contention in the never completed Transatlantic Trade and Investment Partnership, TTIP, negotiations with the United States. As a result of that controversy, and following a wide public consultation which the Commission initiated on the subject, the EU has proposed to revamp investment protection rules, moving away from ad hoc arbitration panels in favour of a more court-like process. The EU and its member states are actively supporting the establishment of a multilateral investment court, MIC, composed of a first instance and an appellate tribunal staffed by full-time adjudicators. Canada was the first country to accompany and support the EU in this direction and has joined forces with the EU and others to promote the idea of an international multilateral court to handle such cases in the future. We are not there yet because this will require an international agreement. In the meantime, CETA breaks completely new ground in this area. Not only does it contain strong language protecting the right of states to regulate but the investment court system established in CETA is composed of a first instance and an appellate tribunal, staffed by full-time adjudicators. This represents a clear break from the ad hoc system of private arbitration of ISDS found in most bilateral treaties. I understand that Ireland does not have any bilateral investment treaties and this is, therefore, not a procedure with which we are familiar or had to work in the past.
That concludes my opening remarks. I hope I have been able to contribute to the committee's understanding of the origins and nature of the discussion on CETA.
I remain at the committee's disposal for any questions.