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Agenda item 2 is a discussion on the European Union-Canada comprehensive economic and trade agreement. This is our first evidence session this morning that involves videoconferencing. Joining us from the European Commission directorate-general for trade are Renita Bhaskar, who is deputy head of unit, USA and Canada; Colin Brown, who is deputy head of unit, legal aspects of trade policy; and Benjamin van Zeveren, who is co-ordinator for bilateral trade relations with Canada.
Good morning, panel. It is good to have a videoconference with you. You will realise that there is a slight delay, so we will ensure that we build time into our questioning to allow for that delay and your response. We have had a wee bit of trouble with the equipment this morning, but I hope that that has now been resolved and we can continue. Can you let us know that you can hear us okay?
Yes. We can hear you perfectly.
We will go straight to questions, as we have lost a bit of time and we have a very tight agenda. Our colleague Rod Campbell has a number of questions on CETA.
I will start with a rather important question. Is the agreement a mixed agreement—that is, one that contains elements of EU and member state competence—or is it not a mixed agreement? What is your view?
Colin Brown will complement what I say, because it is clear that he can come in on that matter. He has a lot more overall experience of the agreement.
On where we are, we have concluded the agreement and are in the process of scrubbing its text. Once that is done, we will send the agreement as it stands for translation into all the official EU languages. At the end of that process, we will prepare a proposal for a Council decision. At that point in time—and during the legal scrubbing—the European Commission will take a view on whether the agreement qualifies as a mixed agreement or is an agreement that deals only with issues of EU competence.
That was very clear. I will add only that members may be aware that an opinion was requested from the European Court of Justice on competence for trade matters in relation to the Singapore free trade agreement. We expect that opinion to be delivered during the course of this year—probably in the second part of the year. That will clarify further all the issues of EU competence and member state competence.
Okay. We are talking about this year being the timescale for that decision on the Singapore agreement. Where are we with the legal scrubbing? Obviously, that has been on-going for some time. Is there a timetable for its likely completion?
As I said, we are not in the final stages, although we are in the last stages of legal scrubbing. After that, the translations will take some time. We expect to be ready with a proposal for a decision to go to the Council by summer this year. We should be ready in the early summer. At that point, we will give a very clear opinion on whether CETA qualifies as a mixed agreement.
Okay. Does anybody else want to add to that, or is that the last word on that aspect?
I think that that is the last word on it.
The timeline is early summer.
Okay. We have a particular issue with investor-state dispute settlement clauses and events that have moved on, at least in relation to the transatlantic trade and investment partnership, since the terms of CETA were agreed. Can you outline where we are now with ISDS and investor courts, and how that affects CETA?
I will try to respond to that question. The first thing that it is important to underline is that CETA, as negotiated, is already the most modern and most progressive agreement that deals with investment protection and investor dispute settlements. There is already full transparency with the agreement. There are already far-reaching provisions to deal with potential conflicts of interest—the system for the appointment of judges is very different from the existing system and was designed to avoid concerns around conflicts of interest. That was all negotiated before the European Union decided to further develop its investment policy and an investor court system.
09:15As you were hinting, Mr Campbell, we significantly updated the approach in the context of TTIP. We are currently talking to the Canadians to see to what extent the EU’s TTIP proposal can be brought into CETA. Those discussions are still on-going. They have to be carefully calibrated because the rest of CETA brings a huge number of benefits to the EU economy. We need to be careful not to get into a situation in which we re-open other parts of the agreement. Those discussions with the Canadians are on-going, but we do not have a clear timeline around when we will be able to make their results public.
I appreciate the limitations of your mandate, which, effectively, comes from the 28 member states. However, the terms of ISDS do not include an appellate mechanism. What discussions are taking place at a member state level on the ISDS issue, and why would you want to have what I might describe as an inferior mechanism to that which is currently being proposed in relation to TTIP?
You are right that CETA, as initially drafted, does not have an appellant mechanism. The EU and the Commission have been pushing for that since 2010. Frankly, we had limited support from the member states when we started on this project. The original CETA text reflects that, in the sense that it has a clause whereby the EU and Canada can consider setting up an appellant mechanism, but it does not specifically provide for it.
As you will have seen, in the TTIP text, the EU goes further, and has put in place an appellant mechanism. You might also have seen that we have just released the text of the Vietnam free trade agreement, which is the first agreement that has the full new system, and it includes an appellant mechanism. Our policy, which is accepted by the member states, is to include an appellant mechanism in our bilateral agreements. It is among the issues that we are discussing currently with Canada. It is still too early to say where we will come out on that particular issue, but one of the issues that we are examining is whether we can upgrade the clause that talks about establishing an appellant mechanism so that we can go further.
I have read comments that suggest that the United States is not entirely happy with the proposals for an investor court. Quite what the outcome might be of those discussions in relation to TTIP is as yet uncertain. Can you give us any further information about the Canadian attitude to the general idea of an investor court? To what extent do you believe that the Canadians will be happy to incorporate an appellant mechanism, at the very least, in ISDS?
As Colin Brown has just said, discussions are on-going. The Canadians have seen the text of the proposal that we have presented in the TTIP negotiations, so they are aware of how far we want to go and what the EU’s new approach is.
We are in the process of going through each provision to see how adjustments can be made within the scope of the legal review without upsetting the entire balance of the full agreement, including the market access dimension. The message about the importance of trying to go as far as possible in upgrading the already reformed investment provisions in CETA has been made very clearly from a political standpoint. Commissioner Malmström has discussed the matter with her new counterpart, minister Freeland. Commissioner Malmström has explained to her that the EU’s new approach is—[Interruption.]
Can you hear me?
Hello.
You are able to hear us.
Yes. Can you hear us?
I can hear you but I cannot see you.
You have lost the video.
Yes.
We still have audio, so we can still hear you. We will try to deal with the problem with the video link, but we can continue with questions as we can still hear you.
Okay. I will carry on.
Shall we carry on?
Yes.
As I was saying, at a political level, the message has been explained very clearly to the Canadians. The new Canadian Government is aware of the political importance of our request and that new guidance has been given at a technical level. It is now up to the negotiators—the experts—to see how far we can go in making adjustments. We will know the answer to that question very shortly, but we do not have a precise timeline that we can share with you at this stage. I ask Colin Brown to give some details.
Among our partners, Canada is very open to changes and to reform of ISDS in general. As I said, the CETA agreement—even before we started to look at it again—was already the most advanced form of ISDS that has been negotiated. In general terms, because Canada has a lot of experience of dealing with investment cases, it is very much open to looking at potential reform. We think that we are on fertile ground in that sense, but we are speaking in the context of a negotiation and we are at a late and delicate stage in that negotiation.
I move on to the impact that ISDS might have on the ability of member states to legislate in areas such as public services, environmental regulations and food standards. Can you comment on that?
We should maybe start with the text. At the beginning, in the preamble, there is a clear commitment from both sides in the text of the agreement that nothing in the agreement raises any obstacles to legitimate public policy objectives that either side may wish to pursue. There is a list of sectors, notably health services and the environment. From the beginning, the concern has been recognised on both sides, and both sides have affirmed their commitment in the preamble to the principle that I have outlined.
Beyond that, we would say that nothing in the free trade agreements that we negotiate—this applies to CETA and other on-going negotiations—prevents member states or Governments, at national or local level, from privatising or regulating a public service or from taking a decision to deliver public services or to change the delivery of a public service. For example, if a Government wanted to bring back into the public domain a public service that has been privatised, there is nothing in our trade agreements that would impede that.
We would deal with such things through the use of what is called a reservation. In the first instance, there is a broad reservation for public utilities, which, notably, means that it is possible for Governments, at either national or local level, to limit the delivery of public services to public monopolies, for example, or through the use of exclusive rights.
As I said, beyond that are specific carve-outs for areas such as health and social services or water supply—the EU maintains a full reservation on the delivery of those services. Any decision on them would not be impacted by commitments taken under the services chapter in the trade agreement. Colin Brown may want to comment further.
I will be more specific on the question of investment in ISDS. To be 100 per cent clear, it is not possible for an investor to bring a case simply because a piece of regulation or an action by a Government might have an impact on the company’s profits. It is important to note that that is not enough to start an ISDS case. In order to bring a case, and in order for that case to be successful, an investor must prove that they have been discriminated against in relation to foreign or domestic investors, that they have been expropriated without compensation, or without adequate compensation—you will find such protection in the European convention on human rights, for example, or, very often, in domestic law—or that they have been treated unfairly or inequitably.
That last ground has, historically, been left open in the drafting of the treaties. In that regard, CETA is again progressive, because it clarifies what actions fall foul of that provision. Actions that might trigger a case and damages under ISDS include acting in a manifestly arbitrary manner, targeted discrimination and a denial of justice. We are strongly of the view that any regulation or legislation—providing that it is done on a non-discriminatory basis—would survive challenge under ISDS. We also think that the procedures that we have put in place are such that they disincentivise investors from bringing a case simply to try to put pressure on a Government. They make it clear, for example, that if an investor brings a case that is unsuccessful, they must bear all the costs and all the charges that a Government might incur in defending the case.
To further elaborate in legal terms, the answer to your question is that the modern, clear system of investment protection that we have in CETA is on the table for TTIP, and it responds to any concern that there might be an interference in the right to regulate.
09:30
I think that the question was broader and went beyond public services; it was about the overall right to regulate. The same principle applies to food products and other goods that we might import under CETA or which benefit from preferential treatment. Nothing in CETA or in other our trade agreements in any way reduces, amends or eliminates certain standards that we have. The imports from Canada have to meet all the rules and regulations that are in place, whether they are technical, relate to food safety or deal with issues such as genetically modified organisms. There is a broader perspective that goes beyond just public services.
I will touch on some special positions, particularly that of Scottish Water. There is an exemption that deals with drinking water, which is a public service, but can you comment on the position of waste water?
I mentioned that there are specific reservations at EU level; you mentioned the one on water supply, and I raised the point that there are others for social services and health services. However, I also mentioned the very broad reservation that relates to public utilities, and we believe that the issue of waste water would be covered by that. That reservation includes all services with the exception of, I think, computer services and telecommunications, so waste water clearly falls under that reservation. There is scope for Governments to have reservations under that category.
What about the position of former public services? For example, what would be the position if it was decided to bring privatised postal services back into public hands?
Again, the overall principle would apply because a postal service could be characterised as a public monopoly. I reiterate the initial statement that we made: Governments can decide who delivers public services and can change who does so. If a Government decides to bring back into the public domain or renationalise a public service that was previously privatised, the Government has the full rights and freedom to do so.
Okay. I think that in civic society, not only in Scotland and the United Kingdom but elsewhere in Europe, there are still concerns that the impact of ISDS in TTIP and, presumably, in CETA could lead to a regulatory chill effect. What is your comment on that?
I will respond to that. It probably goes back to what I was saying previously in that we have been conscious in negotiating CETA and in developing the approach on TTIP of the concerns that have arisen about the current system as regards regulatory chill.
As I think you are aware, there are already 3,000 agreements of this nature in existence, and the UK is party to just under 100 of them. We have looked at the existing system and have made a number of changes in CETA and TTIP that are designed precisely to deal with the issue of regulatory chill—to make sure that there is no risk of regulatory chill coming via those agreements.
That is done to a large extent through the clarifications of the standards, which I mentioned before. As I said, it is only expropriation, unfair or inequitable treatment, or discrimination in two different forms that can form the basis for an ISDS claim. By clarifying in detail the standards for how those rules will apply, we believe that we have removed the risk of any challenge that could have a regulatory chill effect.
In addition, we believe that, through our work on the creation of the court system and the improved procedures and provisions to ensure that the losing party pays all of the Government’s costs, we will disincentivise claims that are not solid or well founded. We will discourage claims that have as their objective the aim of putting pressure on the Government or Parliament to legislate in a particular manner. We believe that the collective system that was put in place will be effective in dealing with any risk of regulatory chill.
Good morning. I will move on to the economic benefits of CETA. The Commission suggested in evidence that the agreement is expected to increase trade in goods and services between the EU and Canada by a quarter. The UK Government has suggested that the agreement will benefit the UK economy and businesses by more than £1.3 billion a year.
Are the panel members still there?
The sound is very faint—we heard the point about the overall benefits for the EU and then we lost your voice.
Can I hear your reply on that point?
I am sorry—we did not hear the question. Can you repeat the second part of the question?
I am asking about the economic benefits that would be realised from CETA.
At this point in time, I can give you an overall picture and some qualitative assessments of where the UK and Scotland could benefit economically from CETA. We do not have a breakdown by member state of the precise numbers, but I will start with the classical part of the trade agreement.
CETA brings new and improved market access for EU goods and services suppliers. Let us start with the tariff lines and the duties. CETA is an ambitious agreement that goes well beyond the past work that we have done—[Interruption.]
We can still hear you.
Shall I continue? Okay. We have the images now too.
We have agreed that 100 per cent of the tariff lines for industrial products will be fully eliminated. Another important part is that a little over 99 per cent of duties will be eliminated for entry into ports. There will be liberalisation on agricultural goods and processed goods, which is also significant, as more than 93 per cent of tariff duties are being liberalised in that area. Given Scotland’s export profile, liberalisation in the area of processed foods could be a particular area of interest as it includes processed drink, notably Scotch whisky.
Another important area in which we have made significant progress that will bring benefits for EU producers is the protection of geographical indication. In CETA we have achieved extensive protection for a long list of EU agricultural products, and Scotch whisky is part of that. This is the first time that we have achieved such a high degree of protection: the highest that Canada can offer for a developed country. The agreement sets down a very important template in that regard.
Beyond the classical part of the agreement concerning goods, we have achieved important market access in the area of services. One example is maritime services. We have also established in CETA a framework for mutual recognition of professional qualifications, which allows professional organisations and members in the EU and in Canada to negotiate with their counterparts for the recognition of professional qualifications. We know that lack of such recognition is an obstacle to the mobility of professionals such as architects, accountants and engineers.
CETA also includes provision for easier mobility for intracorporate transfers and allows companies to bring in their professionals in a facilitated manner. It will be easier for EU professionals to travel to Canada and vice versa, which is another advantage in terms of economic benefit.
On public procurement, which represents roughly 7 per cent of Canadian gross domestic product, we have achieved important progress in CETA. Canada has offered us market access to public procurement contracts, which has not previously been offered to any other country in any other such agreement. We have achieved that new market access not only at national level but at provincial level. Canada has also made commitments on transparency. As you will recognise, it is very important to know about public procurement contracts that are available for bidding. In some respects, that allows us to create a level playing field, given that the EU market is very open.
Beyond the market access dimensions and the classical elements, we recognise that a lot of our trade with Canada is already established. Some of the tariffs are at peak levels, but most of them are quite low, so we have worked on non-profit-distributing models and established a separate protocol on conformity assessment, which allows certification agencies on either side to create and facilitate a path by which certification bodies can certify for goods being exported to Canada to avoid the duplication and higher costs of double testing and so on.
Benjamin van Zeveren may want to add more detail on other aspects. Those are just some examples of the things that are included in the agreement.
Those are the main benefits. There are plenty more, but I do not want to dominate the conversation. Are there specific fields in which you are more interested?
No, that is fine—it was great to get the overall picture that you have given.
I wonder whether you can clarify one point for me, and possibly for the other 500 million people in the European Union. Does the agreement include access to member state health services, or does it not?
I assume that you refer to publicly funded health services.
Yes.
09:45
Starting with the preamble to the agreement, both parties have made a clear commitment that nothing in the agreement will impede or act as an obstacle to legitimate public policy pursuits, which include health services. Going beyond that, there are provisions in the services section of the agreement.
CETA is like any other trade agreement that the EU has negotiated or is in the process of negotiating. There is nothing in those trade agreements that forces member states at national or local level to open public health services to competition from private providers. They are not forced to outsource those services to private providers. Further, they can decide who delivers such services and decide about changes to their delivery. In other words, if a member state has decided to privatise certain services and, at a later date, wishes to bring them back into the public domain—renationalise them—it is free to do so. Nothing in CETA or any other trade agreement that we have negotiated would impede that approach.
We achieve that technically via reservations in trade agreements or in the schedules of the services. I highlight the fact that there is a very broad reservation on public utilities that enables member states to continue services that they deem public utilities. They have every possibility to protect them. They reserve the right to protect them and do not need to make commitments on them.
Beside that broad reservation on public utilities, there are specific reservations at EU level on health services. The EU has taken a broad reservation on health services that applies to all member states. There is also a third level of reservation that each member state can choose to take. I understand that the UK has taken particular reservations that relate to health services, notably ambulance services and residential health services.
There are three layers of reservation, which try to ensure the principles that I mentioned at the outset: that nothing in the trade agreement forces a Government to open public health services to competition, privatise them or outsource them, and that nothing impedes its decision to bring back into the public domain a service that has been privatised.
Okay. I think that that was a no. I must ask you to clarify why, if access to national health service services is not included in the principles of the agreement, it needs to be excluded in a set of reservation lists.
I would turn to the lawyers for the answer because, at the end of the day, CETA is a legal treaty, so what we do needs to be defined in legal language and needs to cover all aspects of the issues to ensure that the protection is complete. Perhaps Colin Brown might elaborate on why trade agreements require such complicated sets of reservations.
In some senses, the answer is relatively simple. This part of CETA looks like the World Trade Organization agreement of trade and services. CETA is modelled on the 1994-95 WTO agreement, part of which deals with access to services. All services, in potential terms at least, are covered by those agreements. Then exemptions are built in—they are carved out through different layers of the agreement—to ensure that, for example, public health services are not covered, and that nobody can use the agreement to access to them.
I do not know whether that answers your question. The point is that we come from the very general scope of the agreements, from which the exemptions and reservations can be carved out.
Actually, I do not think that answers my question. I will try again in another way. Has the United Kingdom not specified its list of reservations or exclusions in relation to access to its health service?
There is an EU-wide reservation on health services, which applies to all member states. I can refer you to page 1633 of the text, where there is a list of the United Kingdom reservations. There is a reservation on health services in the UK. It goes into further detail and you can find the sub-sectors of the health services there. Once again, there is a reservation on health services at the UK level.
After this meeting, I will immediately get the document and turn to page one thousand six hundred and whatever it was.
I am still unclear on the point. If an agreement specifically excludes access to a public service such as the NHS, why does it need to be further defined by an exclusion list? In my view, those two points are contradictory, but I think that I will have to leave it there and hope and pray that you are able to clarify this matter for the public in some other forum.
Bound is not the right word but, as Colin Brown said, there is a certain format of trade agreement, and you want to ensure that all aspects of services that you want to protect—such as health services—are covered.
The United Kingdom has a general reservation on health services, and then goes on to define the sub-sectors. You want to be sure that everything that you want to protect is completely protected. That is why the agreement includes
“Health-related professional services, including medical and dental services as well as services by psychologists; midwives services; services by nurses, physiotherapists and paramedical personnel; retail sales of pharmaceuticals and of medical and orthopaedical goods, and other services supplied by pharmacists”.
There is then an industry classification of those services.
I am sorry to be so technical, but I just want to tell you that there is a very clear reservation on the part of the UK on health services, which is over and above the EU-wide reservation on health services.
Okay—but if, for example, some aspect of the health service is not included in the reservation list because somebody forgot about it, access to that service will be granted and available within the health service.
I will come back to the broad reservation that I mentioned. At EU level, there is a reservation that covers publicly-funded healthcare and social services, including hospitals, ambulances, residential health facilities and so on. There is therefore a broad reservation at EU level that covers health services. Over and above that, as I have said, there is a broad reservation of public utilities, which covers all services, with the exceptions of computer and telecommunication services. The possibilities for Governments to reserve policy space are extremely wide in our trade agreement.
Convener, can I just ask—
We are quickly running out of time and we have another videolink to set up, for which we need some time. Adam Ingram indicated a while ago that he wanted to speak. Do you still want to come in, Adam, or have your questions been covered?
They have not been covered.
Well, we have literally about two minutes left.
Okay. I will try to make my questions brief.
What impact will CETA have on regulatory standards in the EU? Will there be a levelling up or a levelling down in areas such as food standards or chemicals?
CETA does not allow any of the standards, regulations, import conditions, requirements for food safety or technical standards to be changed or amended. The legislative framework for those at EU level remains unchanged, and the same applies for Canada.
Within our legislative frameworks, we are talking about what is possible to do in order to facilitate, for example, the flow of goods and services. In that respect, we have the CETA regulatory co-operation forum. It is important to say that the regulatory forum is a voluntary mechanism that allows regulators the opportunity to exchange best practice and information on regulatory development and that the discussions that take place are in no way binding. Neither party has to go home and make changes in its regulatory system. That is even the case for food safety.
If, as a result of discussions in the forum, the parties agreed to go down a certain path and consider making changes to the legislative framework, those changes would have to go through whatever is the prescribed domestic path for amending legislation or making new legislation. Nothing in CETA changes the food safety standards, whether on GMOs, hormones or any other food safety issue—the standards do not change. CETA provides a forum for exchange for regulators.
There are also emerging areas for regulation. In particular, we have issues around unconventional oil and gas extraction, which is otherwise known as fracking. Will CETA have any impact on regulation forming in that particular area?
There are a few things that I would like to highlight.
Overall, nothing in CETA has an impact on the policies that either party might wish to pursue in that respect. In the “Trade and Environment” chapter, there is specific provision on the parties’ right to regulate. Nothing in CETA should impede or set up obstacles should either party wish to make changes to their regulation or have certain environment protection standards. Over and above that, the chapter includes references to the respect of key multilateral environmental agreements, and it allows each party to establish its own levels of environment protection and to regulate in the area.
On fracking, I would like to say clearly that the EU’s fuel quality directive has not been part of the CETA negotiations and is not affected in any way by CETA. There is complete freedom at EU level to regulate on the issue of shale gas. The regulatory aspects are governed by the EU’s fuel quality directive and the decisions are then for each member state. Nothing in CETA has any impact on it.
That is clear.
We are running over time and we have another panel to come in. We have had many questions from members of the public and we have attempted to ask some of them. We might use some of them to ask further questions of the Commission should we need clarity.
I thank all our witnesses for being with us, helping us to understand, taking our questions and answering in some detail. Thank you so much for taking part in our meeting and for helping to inform our procedures and ideas.
I suspend the meeting for about 10 minutes to allow the room to be set up for the next panel.
10:01 Meeting suspended.Next
Human Rights