By David Robinson, Canadian Association of University Teachers
Broad Scope and Coverage
The EU and Canada are taking different approaches to the proposed CETA chapter on services. The EU text is based on the WTO’s General Agreement on Trade in Services (GATS) and adopts a “positive list” approach – those sectors that a Party wants to liberalize will be listed in a schedule of commitments. Canada, by contrast, is proposing a NAFTA “negative list” approach – all service sectors and measures are covered except those explicitly included in a list of reservations. The European Services Forum, a corporate lobby group, is advocating Canada’s approach, knowing that it will lead to broader coverage of more sectors.
The different approaches being used and the lack of specific schedules of commitments and exclusions at this time make it difficult to assess the full scope and coverage of services chapter. Nevertheless, the intention clearly is to cover an extensive number of sectors and all ways of supply a service including: cross-border supply, commercial presence or investment, and the presence of natural persons. Both texts would place restrictions on regulations and other measures taken by all levels of government, including provincial and municipal authorities.
The only measures and sectors explicitly excluded are government subsidies and loans, measures related to national security, some airport transportation services, and, for the EU, audio-visual services. The EU is also proposing an exemption, as in GATS, for “services supplied in the exercise of government authority”, an exclusion that is supposed to protect public services like education and health care, but has been shown to be narrow and open to conflicting interpretations.
Necessity Test for Prudential Regulation of Financial Services
Given the recent financial crisis, it is important that governments maintain the policy space they need to adopt prudential regulations to protect consumers and prevent risky financial activities. Financial services are included in the draft CETA text, with the EU proposing a carve-out for prudential regulations.
However, this protection is severely weakened by the stipulation that prudential regulations not be “more burdensome than necessary”. This “necessity test” would demand that governments, if challenged, prove
that financial regulations they have adopted are not more onerous than necessary and that they are needed to achieve a specific public policy objective. WTO panels have applied a very high standard for the meaning of “necessary.” A government must show that “there were no alternative measures” available.
Applying a necessity test to financial regulations ignores the reality of the regulatory process in Canada and the EU. Rules and standards are developed through compromises that impose neither the greatest burden nor the least burden on businesses. Requiring all financial regulations to be the least burdensome would limit both the content and the process for democratic decision-making.
Investor-State Dispute Resolution
In the Investment section of the services chapter, Canada is proposing a controversial investor-state dispute process. This is a provision from NAFTA that allows private investors to sue governments for alleged violations of the provisions of the treaty.
Conclusion
CETA’s draft chapter on services reveals that both the EU and Canada are aiming to cover an extensive array of services, which place new limitations on governments at all levels from taking measures that may restrict trade, even if such measures are based on legitimate policy objectives. A vast range of rules and regulations governing the provision of services – from local zoning to health and safety protections and prudential regulations – could be put at risk.