European squares are seething with emotion over the forthcoming signing or failure of the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada. It is the younger brother of the Transatlantic Trade and Investment Partnership (TTIP), a similar agreement meant to be entered into by and between the EU and the US. Both have been scheduled to be signed by the end of 2016, but negotiations for the TTIP have been frozen due to strong European objections and for now only CETA remains headed for the finish line. This in turn has caused its recent emergence from the shadows and fall into critical focus. It has become a hot thread in Internet forums, and last weekend tens of thousands took to the streets of European capitals to express their view of CETA as a Trojan horse.
I do not envy the Bulgarian government for the difficult choice they will have to make: to support CETA or reject it. I believe, however, that the hard-pressed Bulgarian citizens deserve a consistent and logical, albeit modest explanation of this European political match, because when making a choice it is not what you get that matters, but what you lose.
1. The main objective of the 1598-page draft of CETA is to achieve complete elimination of all tariff barriers between Canada and the EU Member States and to establish a common area of free trade and unrestricted investments with the differences between investor and host country fading away.
The advantages of this concept need not be justified as they have been subject of discussion since Adam Smith. Free trade, free competition and protected private initiative investments are what we might call the Tablets of Testimony of capitalist civilization.
2. Skeptics, however, believe that Europe is not ready for such competition, because European cost prices are encumbered with values that are missing in North America, and we are not talking about the American advantages in technology, genetically modified food or financial resources. Here is a simple example: how could a European and an American product compete if the energy component in the US product equals 50 per cent of the energy component in the European product. Compare the price of a liter of fuel at a US and European gas station. Will European governments be willing to give up VAT and excise duties on petrol / diesel to make their products competitive? Or maybe American products will flood Europe and lead to mass unemployment. Without Atlantic coordination on the most important taxes, this competition will be between unequals. We should also bear in mind the fact that the cost of Bulgarian production rises due to another factor, namely state and oligarchic racketeering. This is a factor uncommon for the United States and Canada as the access to weapons there is free.
3. Another acute problem is posed by Article 8.18 CETA, which gives visiting private investors the right to summon to court the host country for violations of the negotiated investment conditions. We are talking about international investment arbitration modelled after the Washington Convention of 1965 that allows a private individual, an investor, to sue an entire country for billions of dollars and to bring it to its knees. Yes, a corporation /private entity/ entitled to sue the host country, not a state entitled to sue another state or a private entity to sue another private individual. Bulgaria ratified the Washington Convention in 2001 and has already gathered the bitter fruits of this ratification.
This responsibility weighing on the state is really an irresistible temptation, as the state is the one debtor that is always liquid and solvent. A state cannot refuse payment or go bankrupt. It will simply burden future generations with taxes, or see its real estate abroad such as embassy buildings be cashed by gloating creditors.
Another delicacy of international investment arbitration is that the respondent State could be held responsible for imperfect acts of state courts because the judiciary system is part of the very State, its creation and responsibility. There can be no independent deck on the state ship for foreign investors. The State is always responsible as one entirety, including for its internal independent bodies.
Not surprisingly, the Union of German judges has requested a ruling from the EU on how such an investment arbitration is compatible with European legal order in the context of CETA.
4. In support of the above statements, I would like to recall the curious transgressions any host state may be held accountable for by foreign investors as laid out in Article 8.10.2:
(a) denial of justice in criminal, civil or administrative proceedings;
(b) fundamental breach of due process, including a fundamental breach of transparency, in judicial and administrative proceedings;
(c) manifest arbitrariness;
(d) targeted discrimination on manifestly wrongful grounds;
(e) abusive treatment of investors, such as coercion, duress and harassment; or
(f) a breach of any further elements of the fair and equitable treatment obligation.
Why does this list of sins sound so familiar?!
Do you understand what it means? It means that an international court will rule as a higher instance, or in other words will control the acts and omissions of the Bulgarian justice system and administration.
This may actually be not so bad, because if such an investor were to lose monies deposited in a bank like CCB and then witness how the only thing done in three years to remedy the situation is sitting and waiting for the birth of the new Sherlock Holmes expected to swoop in and find out who ran away with the whole nine yards, well, said investor will ensure that all that remains in the chicken farm is some feathers and a stuffed rooster head. CCB swallowed nearly 8 per cent of Bulgarian GDP like a black hole. This can only be defined as unprecedented plundering on a global scale. And yet none of the perpetrators of this heinous crime have been found! If this were the US, these 8 per cent would mean nearly 1,350 billion dollars and would be the spark igniting civil war.
5. In fact, CETA and TTIP would give Canada and the US free and unlimited access to European markets without being bound by the free acceptance of immigrants settling there. It is this asymmetry that is infinitely sexy in a commercial way for the US and Canada. This is also the BREXIT dream, access to the European market without correlated immigration. It is by no accident that the British government, being the master in foreign political poker it is, is waiting for CETA. CETA is to blaze the trail the British would then only follow.
6. There are many radical and cynical opinions against CETA and TTIP in European media and internet forums. I do not agree with them; I will only remark on them so as to measure the rising temperature of confrontation.
These opponents claim that the two free trade draft agreements are actually the cornerstones of a newly born trade NATO, the North Atlantic Trading Organization, because the military namesake was going down, and also that the US were in a hurry to occupy commercial Europe and to usurp its economic capacity for export to Russia, China, India and Japan. The easiest way to do this is through the EU door, which already resembles the Fourth German Reich and if you caught the shepherd, the flock would follow.
I think that CETA and TTIP could be the shock treatment Bulgaria needs to heal; however, our country would not be able to withstand such therapy. Trade cohesion of both sides of the Atlantic must be performed as precisely and carefully as spacecraft docking in order to avoid a catastrophe. Of course, there is a silver lining, but evil and its progress should never be underestimated.
Bulgarian Sleeping Beauty urgently needs to wake up and not wait for the awakening kiss of the trade prince, because he will hardly be satisfied by just a kiss.
Valentin Braykov