CETA, the TPP, and Professional Advocacy on Trade Agreements

The other day, Canada and the EU announced amendments to the Comprehensive Economic and Trade Agreement (CETA), introducing a new investment tribunal to hear investor-state disputes. The new approach was developed within the EU in response to strong resistance to the conventional investor-state dispute settlement (ISDS) measures in the EU’s prior trade agreements. The internal EU resistance had threatened to scupper the CETA and possibly other agreements that the European Commission was negotiating.

On the face of it, the new measures respond to many of the sharp critiques of ISDS that had emerged in professional commentary on this highly controversial topic over the years, including the lack of transparency of procedures, the questions surrounding the appointment of arbitration panel members, the lack of a coherent body of case law emerging from the existing mechanisms, and others.

We don’t know yet how well this new system will work, but at first blush it is a significant improvement on what was there before. The likelihood is that this will pave the way for approval of the CETA both by the Canadian and European Parliaments.

The takeaway point is that principled opposition to trade agreements when trade agreements get things wrong is a good thing.

There are lessons from this for Canada’s debate on the Trans-Pacific Partnership (TPP).

The TPP is a massive agreement in terms of the number of words on paper. It is complicated beyond the comprehension of any individual mind as it is; and, given the technical issues it addresses, it is far too short to be fully comprehensible for a reader lacking the contextual knowledge of those who drafted particular clauses, footnotes, or clarifications within the text (“for greater certainty….” is the usual draft canary in the coal mine tweeting that the agreed text may be, to put it politely, open to alternative readings; put less politely, it may be clear as mud).

The TPP also emerges out of a seriously flawed consultative process. In the golden age of trade negotiations – the eight GATT rounds that took place starting in the 1950s and that culminated in the creation of the WTO in 1995 – the issues in play mostly dealt with trade and reducing border barriers. The negotiations were conducted in a “club” environment, where trade ministers negotiated on matters for the most part under their direct purview. In that environment, consulting with a handful of large trading firms, whose representatives could easily fit in a boardroom, may have been sufficient to identify national defensive and offensive interests.

That is no longer the case.

The TPP branches far and wide and intervenes in many areas of so-called “behind-the-border” issues. By the same token, the secrecy with which it was negotiated, which resulted in the exclusion of practical input from most of the communities that care about the issues it was addressing, inevitably means it is riddled with errors of commission (undoubtedly favouring those inside the tent), of omission, and of just plain bad drafting due to unavoidable subject matter ignorance on the part of the drafters and the narrow and self-interested perspectives of their limited group of corporate advisers.

If there was ever an agreement destined to confirm the law of unintended consequences, the TPP is likely to be it, by virtue of its overweening ambition and its flawed process.

So-called “legal scrubs” – review of the text by teams of government lawyers – may or may not catch the errors. Parliamentary review and public debate in the media are now essential elements; these discussions must be as transparent and inclusive as the TPP negotiations were not.

For public intellectuals – those who arrogate to themselves the authority to comment on public policy issues, or who trade on their personal reputations or professional affiliations to lend credibility to particular positions – the burden of the hour is not to seek to praise or to bury the TPP, but to kick its tires, as hard and in as many places as possible.

Think about negotiating the terms for buying a car or a house: you get the best deal when you are prepared to walk away from the deal. What you don’t need is your partner gushing praises about the item under negotiation in front of the sales agent. That just drives the price up. What Canada does not need in the TPP discussion – what Minister Freeland does not need – is to have our public intellectuals gushing about the vital importance of ratifying the TPP.

Tim Groser, New Zealand’s trade minister, described signing the TPP as akin to “swallowing dead rats”. Perhaps he was genuinely gagging, or perhaps he was preparing the ground to defend himself before a disappointed stakeholder community that felt betrayed by the limited extent of market access that New Zealand was able to eke out. Either way, it’s a more prudent posture to take than trying to convince yourself or your constituents that the TPP is something it isn’t.

The TPP is not a great deal. It lives up to its label as a “21st Century” agreement only in terms of the appalling track record of 21st Century economic and political policymaking to date, which has left the global economy reeling from crisis to crisis and in the grip of stag-deflation, and swamped with refugees from the smoking ruins of regions benefiting from regime change and “right to protect” (read “right to bomb”, including hospitals staffed by Doctors Without Borders) interventions.

As public policy, the TPP does good by clearing away much of the rubble of what remains of tariff walls largely but incompletely demolished by the GATT rounds and regional FTAs, as well as by regionalizing the rules of origin, which helpfully eliminates the “spaghetti bowl” effect of multiple, overlapping and inconsistent trade agreements in the Asia Pacific.

As public policy, the TPP is embarrassingly AWOL on the biggest issue facing the world today – climate change and related issues of deforestation and ocean acidification. It is also a buck short and years late in promulgating measures to improve border procedures (the World Customs Organization has already been there, done that, and moved on, and commitments to comply have already been elicited by the WTO in the trillion-dollar Trade Facilitation Agreement). The TPP’s grand innovation on regulatory coherence turns out to be a reconfirmation of commitments made ages ago by all the parties to “good regulatory practices” as defined by the OECD (2012) and APEC (2011). Not hard to curb one’s enthusiasm here. On innovation, leading representatives of two generations of Canadian innovators (RIM’s Jim Balsillie and Shopify’s Tobias Lütke) have denounced the intellectual property provisions as damaging. Doctors Without Borders (we donate, so should you; these gals and guys are the gutsiest, most humane people on the planet, and we are pissed off as hell over the bombing of their hospitals) has denounced it for its impact on cost of medicine.

The TPP is not sacred text. It will not be treated as such in the US Congress. It should not be treated as such in Canada’s Parliamentary review. It should be rigorously dissected in Canada’s public debate. The bugs are there; it will be a sad waste of time if we don’t find them.

The CETA evolution on ISDS shows the benefits of loyal opposition. Yes, we need trade. But we also need good trade agreements.

Analogously, Canada’s engagement in the TPP negotiations improved the text from our perspective because we fought the law and in some cases we won (see the commentary of an outspoken critic of the TPP, Michael Geist, on improvements to the intellectual property chapter that are covered in Canadian fingerprints).

As regards the bottom line on the TPP, Canadians should be demanding: “Show me the money.” The responsibility of Canada’s professional trade community is to respond factually – and to hold the mustard. Let Parliament do its job in deciding ratification, and, if it does decide to ratify, how to implement in the most advantageous way for Canada possible.