Germany threatens trade deal

Canada and the European Union are due to announce an end to negotiations on a multibillion-dollar free trade pact on Friday, but opposition from Germany over a controversial investment protection clause is overshadowing the summit.

Canadian Prime Minister Stephen Harper received European Union President Herman Van Rompuy and European Commission President Jose Manuel Barroso in Ottawa to celebrate the finalization of a 1,500-page document that is expected to increase bilateral trade by 20 percent to 26 billion euros ($33.1 billion) and make Canada the only major economy with preferential access to the US and Europe.

The agreement will not be signed in Ottawa. Instead, the European and Canadian dignitaries will pledge their political commitment to the text.

Five years of negotiations came to close last July but a number of stumbling blocks are hindering what was supposed to be a fairly standard signing ceremony.

Companies suing countries

The fiercest contention is over the pact's "Investor-State Dispute Settlement," or ISDS, which offers corporations the ability to sue national governments outside a country's traditional legal system.

On Thursday, Germany's economy minister, Sigmar Gabriel, said Berlin would not ratify the pact as long as that clause had not been removed. He claimed that Germany and Canada's legal systems offer sufficient protection for corporations, making such a clause superfluous.

"It is completely clear that we reject these investment protection agreements," Gabriel said.

Critics worry that such power would be easily abused by companies looking to manipulate policymakers into doing their bidding. It would give multinationals too much power, they say.

But Gabriel's statement Thursday drew attention to another contentious issue surrounding the treaty, known as the Comprehensive Economic Trade Agreement, or CETA: It is unclear whether the 28 national governments that make up the European Union will have the prerogative to ratify the accord, or whether the European Commission will simply sign off on it.

Blueprint for EU-US free trade agreement

That depends on the agreement's scope. If it deals solely with matters that fall under EU jurisdiction, then a green light is only required from the European Parliament and EU Council. If, however, the pact includes provisions that fall under the jurisdictions of some member states, then approval from all 28 EU countries is necessary.

Gabriel has said he would push for all EU member states to vote on the pact, a prospect that could greatly obstruct the ratification process but one that would be sure to resonate with voters who have lamented a lack of transparency in negotiations.

Unease over the investor protection clause is especially pronounced because CETA is widely viewed as a template for the free trade agreement between the EU and the United States.

There is a widespread sentiment in Europe that abolishing tariffs and other trade barriers could lead to a lowering of consumer standards on the Continent.

Brussels has tried to allay Europeans' fears, but many still lambast the EU's executive for not making the negotiations more transparent.

While the EU's trade commissioner, Karel de Gucht, flatly rejected making any more alterations to the pact - he told a German newspaper, "If the negotiations are reopened, the deal is dead" - EU member states' veto power could be enough to persuade the next trade commissioner to allow for further talks.

cjc/ (Reuters, dpa, AFP)