Germany is to reject a multibillion dollar free-trade deal between the EU and Canada which is widely seen as a template for a bigger agreement with the US, a leading German newspaper reported on Saturday.
Citing diplomats in Brussels, the Sueddeutsche Zeitung said Berlin objects to clauses outlining the legal protection offered to firms investing in the 28-nation bloc. Critics say they could allow investors to stop or reverse laws.
The German government could not sign the agreement with Canada “as it has been negotiated now,” the report said, quoting German diplomats in Brussels.
It also said the clauses in the Canada deal were similar to those in the US agreement, which is still under negotiation.
“The free-trade treaty with Canada is a test for the agreement with the United States,” said one senior official at the European Commission in Brussels, according to the report.
If the deal with Canada is rejected “then the one with the United States is also dead,” added the official.
A spokesman for Germany’s economy ministry referred to correspondence which outlined Germany’s concerns about investor protection in talks with both countries.
“The German government does not view as necessary stipulations on investor protection, including on arbitration cases between investors and the state with states that guarantee a resilient legal system and sufficient legal protection from independent national courts,” State Secretary at Germany’s Federal Ministry for Economic Affairs Stefan Kapferer wrote.
In the letter, dated June 26, Kapferer took a similar position on investor protection in the Transatlantic Trade and Investment Partnership agreement with the US which is still under negotiation.
Brussels argues that without these clauses, companies from Canada would not invest in Europe.
Canadian Prime Minister Stephen Harper and European Commission President Jose Manuel Barroso signed a deal in principle in October last year, leaving officials to work out the final details. Sources said last month that the lower-level talks had run into trouble.
In Ottawa, a spokeswoman for Canadian Trade Minister Ed Fast did not directly address the report that Germany would reject the deal. Instead, Shannon Gutoskie said Canada and the EU were making “excellent progress” as they worked to complete the text.
Gutoskie said German governments had long preferred treaties with tough investor-protection provisions.
The Sueddeutsche report said EU states would this week receive the treaty for officials to examine in detail before it is signed. All EU members have to sign the agreement for it to take effect.
The deal with Canada could increase bilateral trade by a fifth to 26 billion euros (US$34.9 billion) a year and the more ambitious one with the US, if agreed, could encompass a third of world trade and almost half the global economy.
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