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What are Implications of the
Expanding Role of
the Provinces in the Negotiationand Implementation of
Canadian Trade Commitments?
Lessons from the Canada-EUComprehensive
Economic and Trade Agreement
Negotiations
J. Anthony VanDuzer
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Outline of Presentation
Background Canada-EU negotiations for a Comprehensive
Economic and Trade Agreement (CETA)
A new role for the provinces
The Constitutional Context: The Rules for Treaty Making and
Implementation Why provincial commitments are so central in CETAnegotiations
Implications of the increasing significance of trade treatyobligations affecting the provinces for
the negotiation, content and implementation of treatyobligations in CETA and future agreements
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CETA Negotiations are Significant
Trade Minister Ed Fast: the most ambitious plan of its kind in history.
First trade agreement negotiated by EU with a developed country Canadas first since NAFTA
Substantial existing trade and investment relationship with EU
Canadas 2nd most important trade and investment partner after the US
May produce substantial economic benefits
One study shows
Increase in Canadian Annual GDP of more than of 1%
Canadian exports to EU to increase $10.8 billion more than 20%
Significant concerns expressed by various groups, including
Municipalities, academic institutions, school boards and hospitals (MASH)regarding possible procurement commitments
Impact on public water services
Transparency of negotiation process
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New Role for Provinces in CETA
Negotiations
At the table with federal negotiators for the first time CETA agenda likely to include more significant obligations in areas of
provincial jurisdiction than any previous agreement
E.g. provincial procurement
EU insisted on high level of provincial engagement
Resulting negotiation challenges Different provincial priorities
Differences in capacity, resources and engagement across provinces
Impact on effectiveness and efficiency of negotiations
Increased importance of treaty obligations affecting provinces may
mean need to Find ways to provide assurances of provincial compliance
Re-design dispute settlement provisions
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The Constitutional Context: The Rules
for Treaty Making and Implementation
Federal executive has exclusive power to bind Canada tointernational treaties Once a treaty is ratified, Canada is bound to comply under
international law
BUT- Where implementing legislation is required to maketreaty obligations effective as a matter of domestic law
Implementation is by federal parliamentif the subject matter is within federal
jurisdiction (s. 91 of the Constitution Act, 1867)
by provincial legislaturesif the subject matter is withinprovincial jurisdiction (s. 92 of the Constitution Act, 1867)
Labour Conventionscase (1937)
Even if implementing legislation not required
Provinces must comply with Canadian treaty obligations thatapply to them for Canada to be in compliance
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Why provincial commitments are socentral in CETA negotiations
CETA obligations likely to go farther beyond matters clearlywithin federal competence than any previous treaty
Far beyond tariffs and other national border measures
to behind the border regulation within provincial jurisdiction
Goods
E.g. comprehensive cooperation regarding all aspects ofproduct standard setting and application
Services
E.g. recognition of foreign qualifications and experience forlicensing services providers in particular services sectors
Provincial and municipal procurement of goods and services E.g. commitments not to discriminate against foreign suppliers
and to meet certain standards for transparency and fairprocedures
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Why provincial commitments are so
central in CETA negotiations (ii)
European frustration with provinces in prior negotiations Provinces refused to agree to an earlier regulatory cooperation initiative
Rejected electrical safety standards annex to 1998 MutualRecognition Agreement
Provinces lack of commitment led to failure of Canada-EU Trade andInvestment Enhancement Agreement negotiations in 2006
Two events in 2010 raised EU concerns
Newfoundland and Labrador expropriated AbitibiBowater withoutcompensation
AbitibiBowater claimed compensation under NAFTA Chapter 11
federal government paid $130 million to settle claim
Quebec passed special legislation directing Montreal Transit Authority tocontract with Bombardier for supply of subway cars
pre-empting a competitive bid by a Spanish company
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Implications of the increasingimportance of treaty obligationsaffecting provinces Provinces needed to be more involved in CETA negotiations
Their interests are at stake
EU requires credible assurances of provincial compliance
Has affected organization of negotiations
Will it result in
New kinds of assurances regarding provincial compliance?
Provincial participation in dispute settlement procedureswhere provincial measures at issue?
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Implications of the increasingimportance of treaty obligationsaffecting provinces Organization of Negotiations:
For the first time - provinces present at negotiating table
But control of negotiations remains with federal negotiators
What will be the implications for efficiency of negotiations?
Multiple provinces with different
Priorities
Capacity, resources and level of engagement
Challenges for federal negotiators to manage Canadianposition
Led to more complex, expensive (and slower?) negotiations Though so far CETA still on track to complete by end of
2012
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Implications of the increasingimportance of treaty obligationsaffecting provinces (ii) Will Canada need to give more credible assurances to EU that
provinces will comply?
Will there be an extra-constitutional commitment by theprovinces to implement and comply with treaty obligations?
What form might such a commitment take? Provincial legislation implementing provincial obligations?
A political statement from the Council of the Federation orprovinces individually accepting obligations?
An internal understanding among provinces and the federal
government regarding continuing provincial compliance? Some form of commitment addressed directly to the EU?
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Implications of the increasingimportance of treaty obligationsaffecting provinces (iii) Dispute Settlement
When (not if) a dispute relating to a provincial measure is addressedthrough the formal procedures in a treaty for state-to-state disputes orinvestor-state disputes
Should the province be able (or required) to participate directly in the
conduct of the case? Does there need to be some mechanism to ensure provincial
compliance if the measure is found not to be consistent withCanadas obligations in a state-to-state dispute
beyond simply relying on the federal government to seekcompliance?
Would provincial involvement in dispute settlement in relation to areas ofprovincial jurisdiction make Canadian treaty commitments more credibleand so improve Canadas position in treaty negotiations?
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Implications of the increasingimportance of treaty obligationsaffecting provinces (iv) Dispute settlement (ii)
Should a mechanism be put in place that permits the federal governmentto be compensated for
The cost of defending a provincial measure in a dispute settlementproceeding?
Any damage award or settlement amount that has to be paid as aresult of an investor-state arbitral claim that a province hasbreached a treaty obligation regarding investment?
What would this look like?
Some kind of federal provincial understanding or protocol?
Better than presenting a bill to province or withholding federaltransfers to encourage compliance or obtain reimbursement
Would such provincial financial responsibility enhance the credibility ofCanadian commitments?
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CETAs Impact on Future Negotiations
Will provinces be directly involved in future negotiations as inCETA?
Some of the factors that drove this development in the CETAnegotiations will continue to apply
Focus on trade and investment obligations dealing with behind theborder measures in areas within provincial jurisdiction will continue
to intensify
Means continuing significance of
For provinces - Provincial involvement in negotiations
For negotiating partners - Provincial commitment toresulting international obligations
Especially where obligations are customized for each province Substantial provincial engagement required
E.g. procurement
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CETAs Impact on Future Negotiations (ii) BUTare offsetting considerations
CETA negotiations have been complex and resourceintensive (and slow?)
Differential provincial priorities, capacity and level ofengagement
Efficiency - an issue for all negotiating parties
Some provinces may decide that benefits of directparticipation in future negotiations not worth the cost
May prefer to leave to federal negotiators
Future negotiating partners may not have same concerns asEU about provincial compliance
Agreement may not involve same level of provincialcommitment as CETA
May depend on whether there are other effective commitmentdevices
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Concluding Remarks CETA likely marks the beginning of a new era for federal-
provincial cooperation with respect to the negotiation andimplementation of international trade and investment obligations
But
Nature of federal-provincial cooperation in treaty negotiationsand use of commitment devices likely to continue to evolve
Effects on provincial involvement in dispute settlement remain
to be seen
Impact of CETA on how future treaty negotiations are organizedand nature of future commitments will depend, in part, on
CETAs ultimate success in addressing provincial interests
All parties assessment of the costs and benefits of direct
provincial participation in negotiations Extent to which CETA commitments will be used as a template for
future treaty obligations - New forms of commitments will requiregreater provincial engagement
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Thank you.