The current German coalition agreement states, “we want to create the conditions in Germany for CETA to enter into full force.” But so far, CETA has not yet been fully applied because parts of the agreement come under the shared competence of the EU and its Member States. These parts will only enter into force after all Member States have ratified CETA in accordance with their respective procedures. Among the issues tackled by the agreement that fall under this shared competence is dispute settlement in the context of cross-border investments and non-direct foreign investment (‘portfolio’ investments made without any intention to influence the management and control of an undertaking). Until now, only twelve Member States of the EU have ratified CETA at the national level. The German governing coalition partners, the CDU/CSU and the SPD, have not yet addressed CETA; ratification by the Bundestag is thus still pending.
CETA: An Agreement that Serves as a Model
CETA is one of the most comprehensive and ambitious free trade agreements that the EU has negotiated to date. In conformity with WTO regulations, all trade has been essentially liberalized: 99 percent of tariffs were lifted at the time that most parts of CETA entered into force. Within no more than seven years of the agreement first being applied provisionally, trade in industrial goods will be fully tariff-free. Covering areas such as competition policy, investment, and sustainability, CETA goes beyond WTO regulation.
Canada: A Reliable Partner
Canada is the 10th largest economy in the world (2018). Thus, CETA offers German companies significant opportunities through, among other things, the dismantling of all tariffs on industrial goods, broad access to the Canadian procurement market, the protection of geographic indicators in trade with Canada and reformed investment protection with the modern Investment Court System (ICS). Moreover, CETA ensures that the EU and its Member States can continue to develop regulations and standards independently.
For its part, Canada has already completed ratification of the agreement. However, some EU Member States are dragging their feet over ratification. One factor behind this delay was the request of Belgium for the European Court of Justice (ECJ) to clarify if the Investment Court System included in CETA is compatible with European law. In late April 2019, the ECJ ruled that there are no legal problems with CETA. Thus, the creation of arbitration courts within the framework of international agreements for the settlement of investor-state disputes is compatible with EU law.
Now, the Bundestag should speed up ratification of CETA so that the agreement can realize its full potential and can henceforth serve as a model for future preferential trade agreements.