Steven Hill
An 11th hour and 59th minute resolution has been reached to the recent standoff between Wallonia and Europe over CETA, the trade agreement between the European Union and Canada. The pressure on tiny Wallonia and its politicians was immense, as it was being blamed for making the EU a laughingstock before its Canadian partners and the world. Leading Canadian government figures, as well as media outlets like the Financial Times and Wall Street Journal, complained loudly about the diminished stature of a European “union” that cannot prevent a smallish region from scuppering a trade agreement seven years in the making.
That narrow interpretation has a ring of truth, but it also is overly simplistic and reveals how little has been learned from the ongoing debate over the “winners and losers of globalization.” Wallonia’s lonely stand raised important themes about national sovereignty, as well as the personal insecurity that many feel today. In the current climate, in which so many sectors of the public have lost trust and faith in political leaders, those leaders have to go the extra kilometer to soothe public anxieties. And the CETA agreement did not go far enough in that direction. This agreement would have been perfectly fine ten years ago – but now? Not nearly enough.
It’s interesting that the EU gets tagged from both directions – the UK’s isolationists see it as a left-wing plot to strangle them with regulations and immigrants; others in Europe see it as a right-wing plot to impose US-style wild west capitalism on them. Neither view is entirely accurate, but the fact that both contradictory views can exist simultaneously results from that lack of trust.
In an era in which $20 trillion in corporate profits is stashed in overseas tax havens, robbing the public treasuries around the world, a treaty for “free trade” can easily look like another type of deregulation that is going to allow corporations to get away with more than they already do. In an era in which the European Commission has charged that Apple owes €14.5 billion in back taxes, it’s understandable why sizable sectors of the public feel that the system is rigged against them.
Given that, I’m puzzled that the designers of CETA and other free trade agreements (like TTIP) apparently don’t comprehend how little credibility they have. For example, giving multinational corporations the legal ability to sue sovereign governments — the so-called Investor-State Dispute Settlement (ISDS) — not only raises suspicions, both in theory and practice, but seems hopelessly outdated. It’s a leftover concept from the free trade agreements of the 1990s, such as the now discredited North American Free Trade Agreement (NAFTA), which ever since has created one uproar after another. In today’s climate, including such provisions is a poison pill.
ISDS lawsuits have been deployed by hundreds of corporations, both domestic and foreign, against sovereign governments who have passed laws that these businesses claimed infringed on their “rights,” resulting in billions of dollars in damages assessed against the taxpayers of these nations. But what rights do these artificial entities, which are after all themselves creatures of the state – chartered and regulated by the state – have that should somehow supersede the popular will of the democratically-elected governments? It is a historical figment of the imagination to see corporations as individual persons with inalienable rights. They are entities whose needs must be balanced with the needs of society.
Instead, the drift of history is in the opposite direction. Corporate ISDS attacks feed into a public fear that the biggest corporations are themselves becoming sovereign governments that are unrestrained by democratic accountability. After the Fukushima nuclear disaster in 2011, Germany’s government decided to gradually phase out its nuclear power plants and redouble its efforts toward developing renewable energy. Vattenfall, a Swedish utility company that was operating two nuclear plants in Germany, sued for €3.7bn in compensation through an ISDS provision. Incredibly, rather than being smacked down, this claim is still in arbitration. It is just one of a growing number of such cases, according to The Economist.
In Canada, after the Quebec government filed a moratorium on hydraulic fracturing for natural gas, Canadian energy company Lone Pine relocated its headquarters to the United States to sue its home country through NAFTA’s ISDS provision. The US and Canada originally had pushed for the ISDS as a safeguard for US and Canadian business investments in politically unstable Mexico. But what a bitter pill, because now the Canadian government has been sued numerous times by corporations through NAFTA, and has lost seven out of twenty cases, costing them at least $158 million paid to US companies. One of the higher ISDS awards so far has been a $2.3 billion settlement awarded to the oil company Occidental for its claim against the government of Ecuador over its termination of an oil-concession contract.
Making matters worse, these corporate ISDS lawsuits against Germany, Canada, Ecuador and many other countries proceeded in near-secrecy, notoriously lacking in transparency or public input or oversight.
So that is the context that helps us understand Wallonia’s stubbornness. To their credit, its political leaders insisted on more assurance – as well as insurance – that CETA was not going to be another misstep down the path of unraveling the sovereignty of democratically-elected governments. Sure, one can argue – it was argued – this is Canada, for heaven’s sake, one of the more progressive nations on the planet, hardly a practitioner of the Wall Street capitalism that dominates south of its border. One could argue – and it was argued – that Wallonia’s fears were overblown, and there’s probably a degree of truth to that. But it’s hard to know what kind of laws or politicians to trust in the current climate. Enter Donald Trump.
The experts need to write a template for a “new free trade agreement,” one that is better geared for today and not ten years ago. Such an updated FTA would be able to win popular support because it would include the appropriate safeguards, as well as the right values that project a global vision of what trade in the 21st century ought to look like. Such an agreement should include some kind of “code of ethics” for how corporations should act. It would include rules for how to regulate overseas tax havens, and how to ensure that these powerful economic entities can’t run rampant across the globe, cherry picking the laws and regulations that enhance their profits even as they undermine our societies.
If the trade negotiators put half as much effort into crafting rules to crack down on overseas tax havens as they put into so-called “free trade”, it would have a beneficial effect on the things that matter. Somehow they always seem to be keenly focused on lifting barriers on companies, which of course has value for the macro-economy as well as for individual companies, but that needs to be balanced by cracking down on various corrupt corporate practices. How can political leaders expect to do one and not the other, and still retain trust?
In that light, any kind of free trade agreement that would have passed muster 10 years ago, today looks like only half a loaf. It’s too loaded on one side. If public leaders don’t deal with that context in a trust-building fashion, free trade agreements look like another tool of Wall Street capitalism.
So I confess, I watched the conflict play out between tiny Wallonia, the EU and Canada, day after day, with very mixed emotions. I saw the temperatures rising and the exasperation building, and like many I found myself shaking my head and thinking, “What? This is crazy, a small, poor region in Belgium can hold up the entire mighty EU?” But increasingly my heart was overruling my head, saying, “Go Wallonia! Show these thick-headed politicians that a half a loaf isn’t good enough anymore!”
I’m glad that cooler heads prevailed and that finally an agreement was stitched together to move forward. Too much was at stake to leave the whole agreement drowning in a quagmire of trans-atlantic suspicion and paralysis. But political leaders have been forewarned (yet again): democratically elected governments that do not safeguard their own interests, and those of their residents, against continued overreach by multinational corporations may soon find themselves under siege by their own populations, led by populist demagogues. The real battle is over what kind of globalization will prevail, and how to cope with its turbulent centrifugal forces that pull at the seams of society’s fabric. Wallonia deserves thanks for shining a glaring spotlight where it was needed.
Steven Hill is author of Europe's Promise: Why the European Way Is the Best Hope in an Insecure Age, a former journalist in residence at the Berlin Social Science Center (WZB) and a former Holtzbrinck fellow at the American Academy in Berlin.