There was a glossy brochure. A press conference. That Canada-EU trade deal was done in principle last fall, Prime Minister Stephen Harper told us. And then reports this week that Germany has qualms showed just how unfinished the deal is.
Mr. Harper's done-deal announcement last fall was more show-biz than legal conclusion, timed for domestic political reasons. But it set the wheels in motion, and now, politically, he's got to get a deal finished. And he'd better finish it fast, before domestic politics in Europe unravel it further.
The German qualms, most believe, are not fatal to a deal. But there's no guarantee there won't be other problems just like it.
Berlin's concerns are about the investor-state dispute-settlement provisions, features that are a bit like the controversial clauses in the North American Free Trade Agreement which allow companies to sue governments for transgressions of their market-access rights.
Germany's ambassador to Canada, Werner Wnendt, said it doesn't have to be a deal-breaker that scuttles the whole free-trade agreement, but he noted there's debate about the investor-state provisions in his country.
What happened? It's not that Germans suddenly started to worry about Canadian companies taking them to court. It's that they started to think about their next trade negotiation, with the United States, and worried that the Canadian deal would lock them into a precedent. A consultation paper on the U.S. trade negotiations, released in May, discussed the options for investment provisions by pointing what had been negotiated with Canada.
With the signing of the EU-Canada deal to be followed by the negotiation of an EU-U.S. deal, politicians and activists are looking at it in a new light. Many will feel that once investor-state provisions are agreed with Canada, "it will be impossible to resist this" in a trade deal with the U.S., said trade lawyer Lawrence Herman, principal at Herman & Associates in Toronto.
And the issue for Canada isn't just that the Germans have qualms about investor-state provisions. It's that other countries might find something else that starts to worry them in the deal – something that seemed benign with Canada, but now seems scarier with the U.S. They, too, might think about quashing precedents.
In fact, that fear's been out there, in official circles for a while. Diplomats from European countries have warned about letting the final talks drag on too close to the U.S. negotiations. There's always a danger when a trade deal is initialled that it becomes a hostage to shifting politics before it is ratified.
That was extra danger in this case, because of Mr. Harper's rush to announce the agreement-in-principle last fall, and the time that's passing before a text is initialled.
Last October, Mr. Harper was looking to bounce back from the Senate scandal, and finally closing the big trade deals he had touted must have seemed a good way to change the channel. The last stages of EU negotiations had dragged on, but Mr. Harper made a trade-off – as observers had long expected, offering a bigger dairy quota – that settled the biggest remaining issue.
But the fanfare of an announcement of an agreement-in-principle was an idea Mr. Harper pushed, according to European diplomats. There were still a lot of issues to work out to reach a final text. Since the big issues had been worked out, they accepted the Canadian desire to trumpet an agreement in principle. But of course it meant political commitment before final details, and it seems, a long time between the two – time for second thoughts to emerge.
Now, Mr. Harper has to get the deal finished. It's not clear yet whether Germany's concerns about the investor-state provisions are solid, or if they can be assuaged with minor changes. But even though Mr. Harper has promoted them as a key benefit from the deal, they can be sacrificed to save the deal.
Those investor provisions are useful, Mr. Herman argues, but not crucial in Europe. Such provisions began as protections for western investors putting money into countries with questionable legal systems. In NAFTA, they were really expected to be used in Mexico – but U.S. companies have often sued Canada. But Europe's big countries have credible legal systems, and Canada already has a number of investor-protection deals with several eastern European countries, Mr. Herman noted.
And Mr. Harper should be looking for the bottom line now – in case other new qualms surface. He doesn't have time to waste. Seeing the EU deal die would be a political disaster for a PM who has made trade a part of his brand, and who has already declared this deal done.