Canada trade deal comes with strings attached, Mr Varadkar

International trade is an important driver of economic growth in this country but that doesn’t mean we should cede policymaking to the corporations that invest here.

Tánaiste Leo Varadkar’s article in these pages last week, advocating for the ratification of the European Union’s free trade agreement with Canada (Ceta), was more interesting for what it omitted than what it contained.

Citing a study commissioned by the Department of Enterprise, Trade and Employment into four recent EU free trade agreements (FTAs), with Canada, Japan, Korea and Mexico, Varadkar said the cumulative benefit of the deals means Ireland’s GDP will be 2.3 per cent higher than it would otherwise have been by 2030.

What he failed to note, is that almost the entirety of this increase – 2.1 per cent – comes from just one of those deals, the trade deal with Japan.

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The report also notes that while all four FTAs will lead to an increase in Irish global exports of 3.3 per cent by 2030, the EU-Japan agreement drives three-quarters of this combined impact. In fact, it estimates the trade deal with Mexico will have an overall negative impact on exports to that country, of -2 per cent.

There is no question but that the Ceta deal will boost trade, but the benefits are lopsided. While Irish exports to Canada are expected to be 31 per cent higher by 2030, imports from Canada will increase by 84 per cent.

Other FTAs

The newly published study by Copenhagen Economics for the department, which cost €28,000 to produce, is being used by Varadkar as a rationale for the ratification of the free trade deal with Canada, despite the vast majority of the report comprising an analysis of three other FTAs.

To put this in context, the consolidated Comprehensive Economic and Trade Agreement (Ceta) text is nearly 1,600 pages long. The Copenhagen Economics’ report is just 79 pages – and fails to even mention the most controversial aspect of the deal, the investor court system (ICS), which gives multinationals the right to sue governments who curtail their freedom of action as investors.

In Dáil debates, when concerns regarding the ratification of Ceta are posed to Varadkar, he invariably issues a boilerplate response

Perhaps the Government didn’t have time to commission a thorough report. It had attempted to rush through ratification of this hugely complex deal after just a 55-minute Dáil debate in December. That effort only failed because a sustained public outcry about such a truncated debate forced the Government to defer it.

Now, this fig-leaf report is being brandished as evidence of the Government having done its due diligence when, in reality, it is a cursory analysis of four separate trade deals, which concludes that almost all of the cumulative economic benefits to the State flow from just one agreement, the trade deal with Japan.

It is also noteworthy, that the trade element of Ceta – which has seen the reciprocal removal of nearly 99 per cent of tariffs between the EU and Canada – has applied since September 2017. Therefore the State is already reaping the economic benefits of the deal. The element which has yet to come into force, and which is dependent on EU member state ratification, is the portion of the deal concerned with investment protection, which includes the highly contentious ICS.

In Dáil debates, when concerns regarding the ratification of Ceta are posed to Varadkar, he invariably issues a boilerplate response which includes a vague reference to a sustainability impact assessment undertaken on behalf of the EU into the entirety of the deal. One wonders if he has ever read this impact assessment, because it unambiguously recommended that the investor state dispute settlement (ISDS) regime, of which ICS is a variant, should be excluded from Ceta and replaced with a state-to-state enforcement mechanism.

Bottom line

Given that the EU’s own impact assessment recommended dropping ISDS from the final deal, it is bizarre it has been retained – albeit, in a slightly improved format – as ICS. Despite these changes, the core elements of the dispute mechanism remain the same. ICS allows large corporations to leapfrog domestic and EU courts and take cases against governments to specially-created tribunals when policy decisions impact their bottom line.

The risks of ratifying Ceta, in its current format, are potentially huge

Meanwhile, Ceta’s supposed ability to insulate public policy decisions from attack by investors contains an express exception. If the impact of a decision in important public policy areas is deemed excessive, investors can pursue a case against a member state, even if the policy decision was implemented in the public interest.

When it comes to implementing measures that have the capacity to pit the public interest against investor interest, the choice for the Government should be an easy one. Protect the public interest. At all costs.

We know, in the past, ISDS regimes have been used by corporations to overturn or delay important public health and environmental policy measures. It also causes regulatory chill, whereby governments decline to introduce policy changes for fear of being sued. Given the average ISDS award over the past 10 years was in excess of $250 million (€208m), the financial cost to countries of these actions can be enormous.

The risks of ratifying Ceta, in its current format, are potentially huge. Meanwhile, given the trade element has been in force since 2017, the rewards are negligible. If the Tánaiste wishes to convince people of the merits of Ceta, he will need to specifically address genuine concerns about the investor court system. Generalised lionising of the benefits of trade will not cut it.