I propose to take Questions Nos. 23, 25 to 28, inclusive, and 39 to 41, inclusive, together.
The EU-Canada Comprehensive Economic and Trade Agreement (CETA) is a modern and progressive Free Trade Agreement which has provisionally applied across the EU since the 21st September 2017. The Agreement covers virtually every aspect of economic activity and will provide new market opportunities in many sectors for Irish firms given the extensive bilateral business links between Ireland and Canada. Indeed, outside of Europe, the US and China, Canada is our largest indigenous export market. More than 400 Enterprise Ireland clients are doing business in the Canadian market employing over 6,000 people. Since the commencement of provisional application, duties on 98% of products that the EU trades with Canada have been removed. Furthermore, 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.
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 companies and consumers to benefit from a trade agreement at an early stage, as the completion of national ratification procedures across all 27 Member States can take a number of years. To date, 15 Member States have signaled 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, most recently Romania in December 2020.
The provisions that are 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.
Moreover, 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. CETA will scrap or cut almost all the customs duties which EU importers have to pay on goods coming from Canada. As well as final products, the cost of parts, components and other inputs goods used to make final products also falls. This is the case already under provisional application of the Agreement. So, consumers can potentially enjoy lower prices and a wider choice of products and services, but only if the Canadian import satisfies all EU product rules including social and environmental standards, as well as people's health and safety and consumer rights.
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 addressing those specific constraints that might otherwise limit SMEs taking full advantage of the improved EU-Canada trade agreement 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. 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. There are considerable opportunities for Ireland given our strengths in services where Ireland has been particularly successful in expanding its share of the world’s services market in recent years with services exports accounting for approximately 60% of all exports in 2019. In this regard, there are a range of sectoral opportunities for Irish companies in Canada, including –
- Financial software,
- telecoms sector,
- digital media, content and gaming,
- education and e-learning,
- life sciences and
- digital health and consumer retail.
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.
To this end, 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. However, that alternative, unlike a challenge in the Courts, cannot find any act by Government to be ultra vires or unconstitutional - it is only concerned with redress for proven harm.
ICS itself addressees the criticisms of 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.
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.
CETA introduces a precise and specific standard of "fair and equitable treatment" of investors and investment. Therefore, an investor may only have recourse to the Investment Court System (ICS) in very specific limited grounds such as in the case of the denial of justice, or a fundamental breach of due process, or through targeted discrimination for example on the grounds of race, religious belief or gender. None of these measures give the Government any concern that Ireland would be subject to ICS proceedings. Moreover, it is important to note that under the ICS a State can never be forced to change its legislation, only to pay fair compensation in cases where the investor is deemed to have been treated unfairly under the specific grounds detailed. An investor cannot be given compensation just because they have lost profits or suffered economic loss or costs.
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.
The rules for the functioning of the CETA Appellate Tribunal have now been set out. These rules will ensure an effective two-step investigation including an appeal function, bringing it more in line with the structure operating at WTO level. In addition to the Tribunal, and the Appellate Tribunal, CETA also provides for rules for Mediation, an area which traditional investment agreements have largely overlooked, with the objective of facilitating the finding of a mutually agreed solution with the assistance of a mediator, without the requirement to access the Tribunal. A code of conduct for the judges of the ICS has also been established, to further bolster the assurances of the highest ethics standards already contained in the agreement.
Turning to the environment, 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 are binding, with the same legal value as any other provision.
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 CETA affect the Government’s scope for developing new laws in response to the needs and priorities of Irish citizens. CETA includes commitments towards the sustainable management of forests, fisheries and aquaculture. It also includes commitments to cooperate on trade-related environmental issues of common interest such as climate change where the implementation of the Paris Agreement will be an important shared responsibility for the European Union and its Member States and Canada.
As part of the finalising of the Agreement, the EU and Canada also agreed a legally binding Joint Interpretative Instrument (JII) that was added to CETA to provide further assurances in relation to public services, labour rights, environmental protection and investment. It is important to point out that CETA reaffirms the EU and Canada’s right to regulate to achieve legitimate policy objectives. Importantly, in CETA 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.
Regarding Ireland’s own ratification, given that there can be no doubt that CETA is a progressive, high-standard agreement, I believe our own credibility in promoting open and fair global trade would be undermined if we are not in a position to ratify this Agreement.
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 suite of EU Free Trade Agreements that seek to underpin this. Equally, Ireland has been an attractive destination for Foreign Direct Investment (FDI) for many decades and participating in EU-Third Country Agreements that address Investment Protection continue to assist marketing Ireland as a competitive FDI-friendly jurisdiction for multinational enterprise to make their investments with the attendant jobs and prosperity that that entails.
In relation to the Deputy’s question on referring CETA to an Oireachtas Committee, I believe the Committee on European Union Affairs would be best placed to carry out an informed and timely discussion. I look forward to the opportunity of bringing the relevant motion forward to the Dáil in due course.