The Canadian government is shrugging off a news report that says Germany is set to reject a multibillion-dollar trade pact between the European Union and Canada, but experts say this development means a reopening of an agreement that was declared a done deal nine months ago.
International Trade Minister Ed Fast's office refused comment on a Munich newspaper story that said Berlin harbours serious concerns about the deal. At issue are clauses that would give Canadian companies investing in the EU the right to sue governments in the 28-member bloc if they feel their investments have been damaged by government policy.
Critics in Germany fear these rules – which give arbitration panels the power to resolve such disputes – could allow foreign investors to stop or reverse laws, the Sueddeutsche Zeitung reported.
A spokesman for the Harper government would only offer another version of the same comments that Ottawa has been using for months when asked what's happened to the Comprehensive Economic Trade Agreement since Canada and the EU announced an "agreement in principle" last fall.
"Excellent progress is being made," Shannon Gutoskie, press secretary for Mr. Fast, said.
Her comments stand in dramatic contrast to what Sueddeutsche Zeitung is reporting. The paper says the German government could not sign the agreement with Canada "as it has been negotiated now," quoting German diplomats in Brussels.
The biggest concern for Germany, experts say, is really American investors. Berlin fears that the Canada-EU deal will set precedents for foreign investor rights that will be duplicated in the much larger trade agreement being negotiated between Brussels and the United States.
The worry is U.S. investors would then be empowered to challenge Berlin policy-makers' decisions with the final say going to an independent arbitration panel rather than German courts.
Nine months have elapsed since Stephen Harper and European Union officials held a mission-accomplished style press event to herald a tentative deal. All that was left to be sorted out were technical details, Harper government officials have repeatedly said since.
Mr. Fast's spokeswoman offered a similar response this weekend, saying "Canada's work with our European Union partners to complete the legal text of our agreement-in-principle continues."
Trade experts interpret the news from Munich as a sign Brussels and Ottawa will have to reopen negotiations to assuage Germany's concerns as a major member of the EU.
"This development needs to be taken very seriously, although one wonders why the Germans didn't make their concerns known earlier," international trade lawyer Lawrence Herman said.
"The German position clearly means a return to the negotiating table on investor-state dispute settlement rules," he said.
Mr. Herman suggested Canada and the EU might ultimately have to restrict the circumstances under which foreign investors can sue governments under the deal.
"Whatever can be done at this late stage in legal terms, the German position is having a major political impact on the whole CETA situation," Mr. Herman said.
Rules giving independent arbitration powers the right to settle disputes between governments and foreign investors are a feature, most notably, of the North American free trade agreement between Canada, the U.S. and Mexico.
Experts suggest Canada and the EU may have to insert a mechanism in the new agreement that allows affected governments to appeal decisions on suits from foreign investors.
Such an amendment could give EU member country courts the final say instead of independent arbitration panels.
"The message is that Germany … is not going to submit itself to NAFTA Type Chapter 11 investor state arbitration," trade consultant Peter Clark said.
"In their view there is nothing wrong with German courts and foreigners should not have different rights than Germans."
Maude Barlow, national chairperson of the Council of Canadians, an advocacy group critical of the Canada-EU trade talks, called the reported push-back from Germany "a victory for democracy.
She said, "we are pleased that the German government has listened to critics of the investor-state dispute settlement provisions of the deal that give foreign corporations the right to dictate domestic policy."