2016:1

Analysis of the possible effects of the CETA free trade agreement on the environment, human and animal health and democratic decision-making

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National Board of Trade Sweden, November 2016

www.kommers.se

The National Board of Trade is a Swedish government agency responsible for issues relating to foreign trade, the EU Internal Market and to trade policy. Our mission is to promote open and free trade with transparent rules. The basis for this task, given to us by the Government, is that a smoothly functioning international trade and a further liberalised trade policy are in the interest of Sweden. To this end we strive for an efficient Internal Market, a liberalised common trade policy in the EU and an open and strong multilateral trading system, especially within the World Trade Organization (WTO).

As the expert agency in trade and trade policy, the Board provides the Government with analyses and background material, related to ongoing international trade negotiations as well as more structural or long-term analyses of trade related issues. As part of our mission, we also publish material intended to increase awareness of the role of international trade in a

well functioning economy and for economic development. Publications issued by the National Board of Trade only reflects the views of the Board.

The National Board of Trade also provides service to companies, for instance through our SOLVIT Centre which assists companies as well as people encountering trade barriers on the Internal Market. The Board also hosts The Swedish Trade Procedures Council, SWEPRO.

In addition, as an expert agency in trade policy issues, the National Board of Trade provides assistance to developing countries, through trade-related development cooperation. The Board also hosts Open Trade Gate Sweden, a one-stop information centre assisting exporters from developing countries with information on rules and requirements in Sweden and the EU.

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Content 1 Summary ............................................................................................... 2

2 The assignment ..................................................................................... 3

3 Delimitation and method ..................................................................... 3

4 Background to CETA .......................................................................... 4

5 Analysis of the possible effects on the environment, human and

animal health and democratic decision-making ................................... 5

5.1 Explanatory memorandum and preamble to the agreement ............ 5

5.2 Reduction and elimination of customs duties on imports ............... 5

5.3 Technical barriers to trade (Chapter 4) ............................................ 8

5.4 Sanitary and phytosanitary measures (Chapter 5) .......................... 9

5.5 Investment (Chapter 8) .................................................................. 15

5.6 Services (Chapter 9) ...................................................................... 19

5.7 Regulatory cooperation (Chapter 21) ............................................ 25

5.8 Animal welfare (Chapter 21.4) ...................................................... 27

5.9 Trade and sustainable development (Chapter 22), Trade and

labour (Chapter 23) and Trade and environment (Chapter 24) ........... 28

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1 Summary The Government has assigned the National Board of Trade to analyse the

possible effects of the CETA agreement on the environment, human and

animal health and democratic decision-making. The Board has focused in

particular on issues relating to future regulatory space and states’ right to

regulate, and has conducted a review of the chapters in the agreement that

are considered to affect these aspects. The Board collaborated with

several expert authorities.

The Board’s overall assessment is that CETA protects the future

regulatory space of the parties. It is considered that the agreement will in

the long run provide certain positive effects on the environment and

health, while we cannot foresee a significant risk of negative effects on

these or on democratic decision-making.

The Board’s assessment is that the chapter on investment in CETA does

not limit Sweden’s right to regulate to any significant extent. The

protection given to investors is already largely provided by Swedish law

and the European Convention. In so far as Sweden’s right to regulate is

restricted, this is because the Lisbon Treaty moved significant powers

regarding investment agreements from the Member States to the EU

itself. The Board also believes that, given the similarity of protection

afforded by both Swedish law and CETA, the risk of some form of

“chilling effect” on EU legislative work is at most marginal.

Regulatory cooperation in the Regulatory Cooperation Forum will

neither change existing nor develop new legislation. Cooperation in areas

such as the environment and health is already in progress today and

should be seen as a resource to achieve better regulations at the national,

regional and global level.

The Board sees no risk of compromising current or future rules or standards

within the EU or Sweden aimed at safeguarding the environment or human or

animal health. As stated in the agreement, the purpose of CETA, to promote

trade and investment, shall not reduce the protection level of environmental

legislation. Every country has the right to maintain its own levels of protection

and does not need to automatically approve a product that has been approved in

the other market. The increased dialogue, e.g. information exchange on

scientific matters, knowledge, methods and risk assessments, could help to

provide strong protection for health and the environment.

The Board believes that the chapter on services has little impact on the

environment, health and democratic decision-making. In CETA, Sweden has

merely bound commitments that are already existing law. Sweden has also

retained regulatory space by refraining from commitments in certain sectors,

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such as all services within public healthcare and education, and through opt-

outs for ‘public utilities’ which exclude public monopolies and exclusive rights.

Privately-financed education and healthcare services are the only areas where

Sweden commits for the first time, and which could lead to a greater influx of

Canadian providers of these services in the longer term.

In the area of animal welfare, CETA will formalise existing cooperation, which

is seen as positive.

The EU’s new tariff rate quotas for beef in CETA will probably have no direct

impact on Swedish beef production and the management of semi-natural

pastures in Sweden. On the other hand, they could help to increase interest in

Canada in producing beef without growth hormones.

2 The assignment The Government assigned The National Board of Trade to analyse the possible

effects of CETA (the Comprehensive Economic and Trade Agreement) on the

environment, human and animal health and democratic decision-making1.

According to the terms of reference for the assignment, the analysis could be

carried out in collaboration with other expert authorities. The analysis should be

submitted to the Government Offices of Sweden no later than 12 August 2016.

3 Delimitation and method Given the short period for referral back to expert authorities for consideration,

we have limited ourselves to an overall analysis of the possible effects of the

CETA agreement on the environment, human and animal health and democratic

decision-making The terms of reference for the assignment mention that a

number of independent analyses have expressed concern that the agreement

does not adequately safeguard future regulatory powers and States’ right to

regulate. We have therefore focussed especially on these questions.

Section 5 of this analysis contains a review of selected parts of CETA: Article

2.4 (Reduction and elimination of customs duties on imports), Chapter 4

(Technical barriers to trade), Chapter 5 (Sanitary and phytosanitary measures),

Chapter 8 (Investment), Chapter 9 (Services), Chapter 21 (Regulatory

cooperation), Article 21.4 (Animal welfare), Chapter 22 (Sustainable

development), Chapter 23 (Trade and labour) and Chapter 24 (Trade and

environment). These chapters were considered to be the most relevant to the

assignment.

The different parts of the analysis differ in format and scope because of the

short response time for the assignment. The Board has referred back to the

1 Assignment to the National Board of Trade Sweden to carry out an impact analysis of the free

trade agreement between the EU and Canada (CETA), UD2016/11892/AME, received on

14.07.2016.

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expert authorities for consideration and has gathered opinions which due to the

short period of respond must be regarded as indicative and comprehensive.2 The

Board and the expert authorities find that, in order to make a complete analysis

of the impact of the agreement, a more in-depth analysis of several parts of the

agreement in consultation with the specialised authorities is needed, and also

that the agreement have been in force for a certain time.

The Commission’s impact analysis (SIA) from 20113, Canada’s environmental

impact analysis from 20124, literature reviews and the Board’s earlier

statements5 formed part of the basis for the analysis.

4 Background to CETA The Comprehensive Economic and Trade Agreement (CETA) is one of the

biggest agreements ever negotiated by the EU and is part of the new generation

of free trade agreements. Free trade agreements have traditionally dealt mainly

with reductions in customs duties and other preferential measures for the

parties. Since the early 2000s, however, a new generation of more ambitious

free trade agreements has started to take shape; these are broader and affect

more areas of trade policy than just reduced customs duties and the trade in

goods. In CETA, the EU and Canada have agreed not only to abolish duties but

also to reduce non-tariff barriers to trade, promote regulatory cooperation,

improve market access in the service sector, facilitate participation by

companies in public procurement, and promote personal mobility. Apart from

these sections, CETA also contains provisions on geographical indications, a

dispute resolution mechanism and three chapters on sustainable development,

labour and the environment. CETA should be seen as an ambitious free trade

agreement of the new generation.

The negotiations between the EU and Canada started in 2009 and were

concluded at the EU-Canada summit in Ottawa on 26 September 2014.

Negotiations on the ‘Investment’ chapter continued after this date. The final,

legally reviewed, text of the CETA agreement was published on 29 February

2016.6 On 5 July 2016, the European Commission submitted a proposal to the

Council to adopt CETA as a ‘mixed agreement’,7 with the implication that it

2 The Swedish Chemicals Agency, the Swedish Environmental Protection Agency, the Swedish

Board of Agriculture, the National Food Agency, the Uppsala University, the Gothenburg

University 3 Sustainability Impact Assessment, http://ec.europa.eu/trade/policy/policy-

making/analysis/sustainability-impact-assessments/assessments/#study-geo-14 4 Initial Strategic Environmental Assessment - February 2012, www.international. gc.ca 5 E.g. ref. 120-1006-2007, 2011/01259, 2014/01443-5, 2015/02033-3, 6 The text of the agreement can be found under ec.europa.eu/trade/policy/in-focus/ceta. 7 When the EU negotiates and concludes an international agreement, the Union has either

exclusive powers or powers shared with the Member States. Where these powers are exclusive,

only the EU can negotiate and conclude the agreement. Where the powers are shared with the

Member States, the agreement is concluded both by the EU and by the Member States – a ‘mixed

agreement’.

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needs to be ratified by all the Member States before it can fully enter into force.

As this could take a long time, the agreement is expected to apply provisionally.

5 Analysis of the possible effects on the

environment, human and animal health

and democratic decision-making

5.1 Explanatory memorandum and preamble to the agreement The Commission proposal for a Council Decision8 sets out the reasons for the

CETA agreement, affirming that the agreement is not intended to compromise

the conditions for the environment, human and animal health and democratic

decision-making: ‘CETA is fully consistent with Union policies, including those

affecting international trade. In this respect, CETA will not lower or amend EU

legislation, nor will it amend, reduce or eliminate EU standards in any

regulated area. All imports from Canada will have to satisfy EU rules and

regulations (e.g. technical rules and product standards, sanitary or

phytosanitary rules, regulations on food safety, health and safety standards,

rules on GMO’s, environmental protection, consumer protection, etc).’ It

further states that ‘The agreement also contains all the guarantees to make sure

that the economic gains do not come at the expense of fundamental rights,

social standards, governments' right to regulate, environmental protection or

consumers' health and safety.’

The preamble to the agreement recognises ‘that the provisions of this

Agreement preserve the right of the Parties to regulate within their territories

and the Parties’ flexibility to achieve legitimate policy objectives, such as

public health, safety, environment, public morals and the promotion and

protection of cultural diversity.’

5.2 Reduction and elimination of customs duties on imports

Possible impact on the environment of increased import competition for

beef

CETA will abolish most customs duties on food and agricultural products

traded between Canada and the EU.9 For some products, the EU and Canada

have undertaken to improve market access through tariff rate quotas alone, i.e.

duties will be reduced or removed only for a limited quantity of the product.

This means that the effects of CETA in the form of increased import

8 COM(2016) 443 final. 9 The EU is to eliminate duties on 93.5 per cent of tariff lines for agricultural products and

foodstuffs, while Canada will eliminate duties on 92.8 per cent of tariff lines, see

http://trade.ec.europa.eu/doclib/press/index.cfm?id=974

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competition will be limited for those products which are covered by tariff rate

quotas; e.g. this applies to beef in the EU’s case. Canada has also entirely

excluded tariff lines from liberalisation within certain sectors (poultry, eggs,

dairy products).10

The Board has chosen to examine one aspect of the tariff commitments in

CETA which has attracted attention: the EU’s tariff rate quotas for beef. This is

an important example of a market access issue related to Swedish

environmental quality targets. If these tariff rate quotas give rise to increased

competition which has a negative impact on Swedish beef production, this

could affect the chances of achieving the Swedish environmental quality

objective of a varied agricultural landscape.11 The risk of Swedish beef

production being affected by CETA is discussed in this section. The Swedish

Board of Agriculture was invited to submit comments and views, which are

reported below.

The commitments made in CETA mean that the EU is to open new tariff rate

quotas for bison meat and fresh and frozen veal and beef totalling 48 840 tonnes

(carcass weight equivalent) when the commitments under the agreement are

fully implemented after five years.12 This is equivalent to 0.6 per cent of the

consumption and production of beef in the EU in 2015.13 If the entire tariff rate

quotas were to be used for imports of prime cuts, the Swedish Board of

Agriculture estimates that this would equate to 3.2 per cent of EU production of

prime cuts.14

Whether or not Canada will be able to make full use of these tariff rate quotas in

the long term will depend on a number of different factors. Some conditions for

Canada to be able to fill the tariff rate quotas for beef are that it should be able

to produce enough hormone-free beef and that enough establishments should be

approved for exports to the EU.15 At present, four establishments in Canada are

10 So-called supply-managed sectors. The supply-management policy means that both the supply

from domestic production and imports are regulated. 11 The Government’s definition of the environmental quality objective of ‘A varied environmental

objective’ includes that the landscape is open and richly varied with significant areas of managed

semi-natural pastures. See http://www.naturvardsverket.se/Miljoarbete-i-samhallet/Sveriges-

miliomal/Miljokvalitetsmalen/Ett-rikt-odlingslandskap/Precisering-av-Ett-rikt-odlingslandskap/ 12 CETA also means that imports from Canada within the WTO tariff rate quota for high-quality

beef of 11 500 tonnes (from Canada or the USA) will be duty-free rather than attracting 20 per

cent duty. 13 The details of EU consumption and production are taken from the ‘Short-Term Outlook for EU

arable crops, dairy and meat markets in 2016 and 2017’, winter 2016,

http://ec.europa.eu/agriculture/markets-and-prices/short-term-outlook/pdf/2016-3 en.pdf.

The figures for 2015 are estimates. 14 The Swedish Board of Agriculture assumes that 20 per cent of the carcass is made up of prime

cuts and that it appears to be theoretically possible to use all of the new tariff rate quota volume in

CETA for imports of prime cuts. 15 Note that the EU prohibition against beef from animals treated with hormones or other growth

promoters is unaffected by the SPS Chapter of the free trade agreement, so the prohibition applies

to Canadian beef also.

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approved for exports of beef to the EU.16 Other major prerequisites are that the

price for beef on the EU market should be attractive and that there should be

sufficient demand for Canadian beef on the EU market.

The Canadians have also stressed that the EU rules for carcass

decontamination17 have a major bearing on whether the improved market access

for beef in the EU can be exploited to the full. Some anti-microbial agents used

in carcass decontamination in Canada are not approved in the EU, and this has

been raised as a limiting factor.18 The Canadian Cattlemen’s Association has

stated, however, that it should be possible within 5-10 years of the conclusion

of negotiations on CETA to produce 50-100 000 tonnes of hormone-free beef,

and even more in the longer term, which would then allow full use of the tariff

rate quotas.19 The chances of such a change may also be favoured by the fact

that demand for hormone-free meat seems to be increasing within the Canadian

market too.20 In other words, it is possible that Canada will be able to make full

use of the tariff rate quotas that the EU will apply to imports of beef, and that

imports into the EU of beef from Canada could then increase significantly.

If the EU’s new tariff rate quotas for imports of hormone-free beef from Canada

were to be fully exploited, what would be the effect on the EU market? The

Swedish Board of Agriculture believes that the tariff rate quotas in CETA for

imports into the EU will probably not have any great effect on the EU market

because the quota volumes amount to so little (0.6 per cent) of EU production.

Even if the entire tariff rate quotas were to be used for imports of prime cuts,

the Swedish Board of Agriculture believes that the effect on the EU market

would probably not be particularly great either.

The Swedish Board of Agriculture therefore considers it unlikely that the

EU’s new tariff rate quotas for beef in CETA will have any direct impact

on Swedish beef production. This means that the tariff rate quotas will

probably not have any impact on the conservation of seminatural pastures

in Sweden either. The Swedish Board of Agriculture notes that just over 50 per

cent of Swedish consumption of beef is covered by meat produced in Sweden.

The demand for Swedish beef exceeds the supply, and the prices to the producer

are high.

16 European Commission lists of establishments, figures retrieved 04.07.2016; see

https://webgate.ec.europa.eu/sanco/traces/output/non_eu_listsPerCountry_en.htm# 17 Decontamination means that the carcasses are cleaned with an agent to kill bacteria. 18 See e.g. http://ipolitics.ca/2016/05/11/livestock-carcass-washing-rules-remain-a-canada-eu-

irritant-despite-ceta/ 19 EU - Canada Trade SIA (2011), page 61. 20 See e.g.http://www.producer.com/2013/10/aw-will-look-outside-of-canada-for-beef-produced-

without-growth-promotants/ and

http://www.calgarysun.com/2016/04/29/earls-beef-decision-is-angering-alberta-ranchers-but-did-

canadas-industry-drop-the-ball.

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Of course EU beef production is affected not only by CETA but also by other

free trade agreements which are in force, and in the long term also by the

possible outcome of ongoing negotiations (e.g. between the USA and

Mercosur) or new negotiations (e.g. with Australia). The Swedish Board of

Agriculture notes that the total tariff rate quota volume for beef in all free trade

agreements applied within the EU and in ongoing and future negotiations could

be so large in the long term that it might affect the EU market and possibly

Swedish beef production, and hence the conservation of semi-natural pastures..

In conclusion, a possible positive effect of EU customs quotas for beef in

CETA might be to help to increase interest in Canada in producing beef

without growth hormones.

5.3 Technical barriers to trade (Chapter 4) CETA is one of the new generation of free trade agreements that go further than

traditional free trade agreements. The chapter on technical barriers to trade

(TBT) is therefore a key area of the CETA agreement and is considered to be

one of the most ambitious parts of it. It has been noted in a number of reports

that there are many unnecessary barriers to trade between the EU and Canada

arising out of divergent regulatory systems.21 CETA has great potential to

address these barriers in an effective way. Unnecessary differences in rules not

only impede trade between the EU and Canada; they also affect the

development of global rules and standards and risk holding back important

solutions to global challenges, particularly in the environmental field.

Chapter 4 contains provisions to promote closer contact between the EU and

Canada in the area of technical barriers to trade. One example are assessments

of conformity.22 Chapter 4 refers to a separate protocol for assessments of

conformity which is included as an annex to the CETA agreement. This means

that the parties are expected to treat the bodies of the other party in the same

way as their own and to recognise each other’s test and trial results in the

conformity assessment procedure. This means that a body within the EU can

test EU products for export to the Canadian market according to Canadian rules,

and vice versa, which will prevent both sides from needing to run the same test

twice, thus significantly reducing costs for enterprises and consumers.23

Cooperation to prevent rules from diverging between countries contributes

to more effective trade because enterprises do not need to adapt their

production and goods to the requirements of different countries. However,

21 Joint EU-Canada study of the costs and benefits of closer economic partnership European

Commission and Government of Canada, 2008; for the Board’s earlier statements on Swedish

interests in economic relations with Canada, see e.g. ref. 120-1006-2007 and ref. 2011/01259-1. 22 Assessments of conformity may include product tests, inspections and certification. 23 The EU and Canada have agreed to recognise each other’s conformity assessment certificates

in areas such as electrical products, electronics and radio equipment, toys, machinery and

measuring instruments. Although this does not match the way in which the EU works within the

Union, it is a very big step forward in the EU’s international agreements.

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this does not mean that the EU and Canada cannot retain their own rules.

Each country can retain its levels of protection and does not automatically

need to approve goods that have been approved in the other market. It is

only where EU and Canadian rules offer equivalent levels of protection that

mutual recognition comes into play; what is known as equivalence. That means

that only where products are considered to be as safe as EU products (because

the Canadian rule is deemed to provide an equal level of protection to the

European rule) can they gain automatic access to the EU market.24

Article 4.6 contains a section on transparency. The purpose is the same as that

of the WTO’s TBT committee, which is to allow the EU and Canada to submit

comments on each other’s legislative proposals.25 The chapter also provides for

closer cooperation between standardisation bodies to allow them to exchange

information on planned standards or to work together to harmonise standards,

e.g. in the environmental field, where there is such a mutual interest. This

should increase confidence in and knowledge of each other’s rules and

facilitate cooperation, and lead in the long term to better global

environmental protection through joint solutions.

5.4 Sanitary and phytosanitary measures (Chapter 5)

Background

Trade in food and agricultural products carries certain risks relating to the

spread of diseases, hazardous substances and plant pests. Legislation and

controls are needed to guarantee good food safety, animal health and plant

protection. Apart from pure health aspects there are major economic interests in

maintaining good protection for animal and plant health and food safety. Such

national rules do however affect trade. That is the reason for the WTO’s SPS26

Agreement, which stipulates how countries should draw up their health

protection rules to safeguard the life and health of people, animals and plants.

The WTO rules are of an overarching nature. A fundamental principle laid

down in the agreement is that each country has the right to determine its own

level of protection and that a country’s safeguards should be based on

international standards and a scientific risk assessment.27 The countries can thus

protect themselves but must do so in a way that disrupts trade as little as

possible.

The overarching nature of the SPS Agreement leaves room for countries to

regulate their own imports of food and agricultural products. In order to trade in

24 Equivalence is also applied within SPS; see section 5.4 of this report. 25 However, CETA should not lead to over-hasty measures affecting safety, health, environmental

protection or national security. 26 SPS stands for sanitary and phytosanitary standards. 27 Best available knowledge.

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these products, however, the exporting country often needs to be approved by

the authorities in the importing country.

The SPS chapter of CETA is based on the WTO’s SPS agreement

One way of facilitating trade in food and agricultural products is to agree with

other countries on more effective application of SPS measures, and that is the

context in which the SPS chapter of CETA should be viewed. The chapter

builds on the WTO’s overarching SPS Agreement and is intended to minimise

unnecessarily complicated, time-consuming and potentially overlapping areas

of rules and procedures between the EU and Canada.28 The idea is that the

chapter should also contribute to greater cooperation, exchange of information

and dialogue between the parties, thus strengthening confidence in each party’s

SPS measures. This is a positive thing and should facilitate trade in the longer

term.

The purpose of the chapter is thus to ensure that the parties’ respective SPS

measures do not create unjustified barriers to trade. This means progressing

further with the implementation and application of the WTO’s SPS Agreement,

which both the EU and Canada are already bound by.29

What the EU and Canada have agreed on in the SPS chapter of CETA is to

clarify the framework within which SPS measures should be taken. The rules in

the SPS chapter of CETA provide clarification to enhance predictability for

both authorities and enterprises. The entry into force of the agreement is

therefore expected to facilitate trade between the parties.

CETA does not change health protection law in Canada, the EU or

Sweden, nor does it restrict the right to determine the level of health

protection that each party wishes to have within its territory. For example,

the SPS chapter states that the parties should notify each other of emergency

measures.30 After the decision to take such a measure has been made, the party

concerned has 24 hours to notify the other party.31 There is thus nothing in

CETA to prevent the EU from taking steps at short notice to safeguard human,

animal and plant life and health.

The SPS chapter in CETA can be seen as the most ambitious SPS chapter

among the EU’s completed free trade agreements, and the Board’s view is that

it is positive for Sweden.

28 The SPS chapter is also based on the veterinary agreement between the EU and Canada from

1999 (Agreement between the European Community and the Government of Canada on sanitary

measures to protect public health and animal health in respect of trade in live animals and

animal products). 29 Article 5.4 affirms the respective rights and obligations of the EU and Canada under the SPS

Agreement.

30 Article 5.13 CETA. 31 Consultations must then be held within 10 days if the other party requests this.

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Content of the SPS chapter in more detail

The Agreement contains an article on regionalisation, i.e. how the importing

party can decide that a region may be considered free from an animal disease or

plant pest that exists in other parts of the exporting country.32 The article covers

principles for animal and plant health. A number of animal diseases are listed,

and the parties are to agree at a later stage on the procedural steps to apply to

regionalisation decisions concerning these diseases.33 Regionalisation (also

called zoning) is important because it means that imports from disease or pest

free region of an exporting country can be allowed even if there is an outbreak

in other parts of that country.

The SPS chapter contains an article on equivalence. The term means that the

parties acknowledge that differently designed measures may provide equivalent

protection against a specific risk. The recognition of equivalence may cover all

or parts of a piece of legislation, with or without supplementary conditions.34

Recognition of equivalence reduces duplication of effort, both for competent

authorities and for exporting enterprises. Equivalence can result in simpler

certification, for example.35 Principles and guidelines for how the parties should

proceed in the future when authorities are to evaluate and recognise equivalence

will be agreed between the EU and Canada at a later stage.36

The parties have agreed on a number of acknowledgements of equivalence37

covering products of animal origin (genetic material, meat and meat products,

animal by-products, shellfish etc.). The highlighted areas where equivalence has

been recognized mainly concern ways of ensuring freedom from

microbiological risks.38 The equivalence decisions do not touch on issues such

as growth hormones or antibiotics in animal production. It should also be noted

that the agreement ensures that the salmonella guarantees (extra import controls

to protect against salmonella) between Sweden and Finland will continue to

apply. The intention is for the parties to agree between them on equivalence in

parts of the legislation that concern plant products. However, this will take

place at a later stage.

32 This has to do with the approval process for exports because recognition of the zoning decision

may be a condition of approval for export. 33 See Annexes 5-B and 5-C, which cover e.g. the commonly occurring Newcastle disease (in

poultry), which has also appeared in Sweden several times in the past 20 years. 34 Article 5.6 CETA and Annexes 5-D and 5-E. This assumes that the exporting country can

objectively demonstrate that the measure achieves the importing Party’s appropriate level of SPS

protection. 35 See Article 5.9 on health certificates. 36 See Annex 5-D. There are some already agreed principles for what is required to maintain

existing equivalence agreements where the importing country changes an SPS measure for which

there is a recognition of equivalence. 37 See Annex 5-E. 38 This applies, for example, to inspections for trichina, or how to provide protection against TSEs

(transmissible spongiform encephalopathies). Trichina worms are a parasite that may be present

in pork and can be transferred to humans.

TSEs are prion diseases in cattle, sheep and goats, some of which can infect a person.

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The SPS chapter contains a provision to the effect that the parties should

recognise the principle of ‘pre-listing’, i.e. that imports should be allowed if the

production facility has been checked and approved by the authorities in the

exporting country without the authorities in the importing country conducting

their own inspections. Here again, the aim is a more effective application of

SPS measures to avoid duplication of effort for both enterprises and authorities.

The principle of pre-listing is important from a resource perspective because

inspections from the importing country can be both costly and time-consuming.

In practice it means that the EU and Canada recognise that they can rely on

each other’s authorities – i.e. the importing country accepts that the authorities

in the exporting country can check and certify that specific import requirements

have been met, just as well as the importing country’s own authorities.

The SPS chapter also covers special import requirements concerning plant

protection. An annex establishes a process for the parties to set up and

continuously update their special import conditions for major plant products,

with a list of regulated plant pests that affect them.39 The list should be based on

information from the other party. A formal dialogue should be initiated between

the parties to establish special import conditions for plant products

(phytosanitary measures). The intention is to define specific import

conditions later. In other words, CETA does not entail any reduction in the

level of plant protection. This is positive, as protection against plant pests

that can harm forests is important to Sweden.

Through CETA, the parties undertake to strive for more transparency in the

SPS area, in the form of better exchange of information.40 The idea is that this

should increase confidence in each other’s health protection rules and

authorities. A Joint Management Committee for Sanitary and Phytosanitary

Measures (JMC) is also set up.41 This committee will meet when necessary,

normally once a year, and should consist of regulatory and trade representatives

from both sides.42 Issues that cannot be resolved in the Committee may be

referred, at the request of either party, to the CETA Joint Committee, to which

the JMC also reports.43 Part of the mandate of the JMC is to review the annexes

to the SPS chapter at least once a year and decide on any changes to them. This

means that the EU and Canada will continue to strive for simplifications in the

SPS area through constant cooperation at the expert level.44

39 See Article 5.7(8) and Annex 5-G 40 See Article 5.11. 41 See Article 5-14. 42 Sweden is part of the Potsdam configuration for Canada and can therefore attend the meetings

of the JMC under the veterinary agreement and, in the future, probably the JMC meetings under

CETA also (according to the Swedish Board of Agriculture, ref. 2016/1126-3). 43 See Article 5-14(6) and (9) The CETA Joint Committee is headed by the Canadian Trade

Minister and the EU Commissioner for Trade. 44 See Annexes 5-D and 5-C.

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Finally, the entire SPS chapter of CETA is covered by the dispute resolution

mechanism established in CETA.45 This means that questions of interpretation

and application of the SPS provisions can be referred to arbitration, which is a

means of pressuring the parties to implement the SPS chapter.

Handling of specific SPS-related market access problems

During the negotiations between the EU and Canada on CETA, some concrete

specific SPS-related trade problems were also discussed. This part of the

negotiations means in practice that the parties prioritise each other’s cases,

expedite ongoing processes or undertake to propose changes at home in

accordance with their own domestic legislative procedures. The JMC created

joint work plans, and already a work plan on market access for meat has been

adopted. As a result of this, Canada has expedited the approval procedure for

exports of beef from the EU to Canada. In 2015 Canada conducted inspections

in some EU Member States in order to draw up a country approval for the

whole of the EU for beef and pet food.46 This allows establishments in the EU

that are interested in exporting to Canada to apply to be listed.47 Canada has

moreover agreed that the authorities in the EU Member States (including the

Swedish National Food Agency) can carry out inspections and list approved

establishments (cf. pre-listing) for exports of beef.

The EU in turn completed the approval process for lactic acid treatment as a

cleaning method for beef carcasses in 2013.48 The EU has also undertaken to

proceed further with the process of risk assessment on recycled hot water in

abattoirs, and will develop a proposal for a regulation on this. Work is on-going

in the EU expert committee PAFF to decide on the specific conditions under

which it is safe to re-use such hot water.49

The precautionary principle and SPS

The precautionary principle is not mentioned explicitly in CETA, nor in the

WTO’s SPS Agreement. On the other hand, it is expressly mentioned in the

EU’s key legislative act for food safety.50 The question of what this means has

been raised in the SPS context when the EU invoked the precautionary principle

in connection with the so called hormone dispute.51 In this dispute, the WTO’s

45 See Article 29.2 CETA. 46 Sweden is one of the 4-5 Member States inspected. 47 Sweden is approved for exports of beef, and there is one establishment listed (telephone call

with Matthias Schädlich, Swedish Board of Agriculture, 14.07.2016). 48 Commission Regulation (EU) No 101/2013 of 4 February 2013. The method, which reduces

the risk of salmonella and VTEC (verocytotoxin-producing E. coli) in particular, was of interest

to Canada and had already been evaluated in 2011 by the EU risk assessment authority EFSA.

See also section 4.2 of this report. 49 National Food Agency, report of meeting of the Standing Committee on Plants, Animals, Food

and Feed (PAFF), biological safety section, 17 March 2015. 50 Article 7 of Regulation (EC) No 178/2002 of the European Parliament and of the Council. 51 EC Measures concerning meat and meat products (hormones), WT/DS26/AB/R,

WT/DS48/AB/R, 16 January 1998.

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Appellate Body stated that the precautionary principle should be considered to

be an integral part of the SPS Agreement, e.g. in Article 5.7 of that agreement.52

The precautionary principle is thus taken into account in the application of the

WTO’s SPS Agreement.

The ruling of the Appellate Body in the hormone dispute as well as the

relationship between the precautionary principle and the SPS Agreement and its

principles of scientific risk assessment have been the subject of extensive

discussion, including in connection with other disputes in the SPS area.53

It is nevertheless important to remember that a central principle laid down in the

SPS Agreement is that WTO members are free to define the level of protection

that they wish to maintain on their territory. Given this, the Agreement states

that when measures are taken to maintain the desired level of protection, they

should be based on international standards and a scientific risk assessment, and

should distort as little trade as possible. The WTO’s dispute settlement body has

explained that the level of protection countries apply when they regulate in the

SPS area should be applied in a consistent manner. The Appellate Body has

also stated that the fact that measures must be ‘based on’ a scientific risk

assessment should be interpreted to mean that there must be a rational

relationship between the scientific risk assessment and the measure at issue.

In summary, CETA means that the EU and Canada affirm their rights and

obligations under the WTO’s SPS Agreement.54 CETA does not alter the

fact that both the EU and Canada have the right to determine their own

level of protection. Hence CETA does not affect the possibilities of the EU

to take protective measures in the SPS area. The increased dialogue and

exchange of information between the parties through the JMC, e.g. on

scientific evidence, methods and risk assessments for SPS measures, may

also help to maintain and improve effective health protection.55

52 Extract from paragraph 124 of the report from the Appellate Body: ‘First, the principle has not

been written into the SPS Agreement as a ground for justifying SPS measures that are otherwise

inconsistent with the obligations of [WTO] Members set out in particular provisions of that

Agreement. Secondly, the precautionary principle indeed finds reflection in Article 5.7 of the SPS

Agreement. We agree, at the same time, with the European Communities, that there is no need to

assume that Article 5.7 exhausts the relevance of the precautionary principle. It is reflected also

in the sixth paragraph of the preamble and in Article 3.3. These explicitly recognize the right of

Members to establish their own appropriate level of sanitary protection, which level may be

higher (i.e. more cautious) than that implied in existing international standards, guidelines and

recommendations.’ 53 The EU lost the case because the Appellate Body held that the measure was not based on a risk

assessment. The content and status of the precautionary principle in international law are also

disputed, and the Appellate Body chose not to comment on the status. The four elements set out

in Article 5.7 of the SPS Agreement are as follows: i) The measure must be adopted in a situation

where relevant scientific evidence is insufficient; ii) The measure must be adopted on the basis of

available pertinent information; iii) The country in question must seek to obtain the additional

information necessary for a more objective assessment of risk; and iv) The country must review

the measure within a reasonable period of time. 54 See Article 5.4 CETA. 55 See Article 5-14(2)(f).

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5.5 Investment (Chapter 8)

Background

In the assignment from the Government, the Board is asked to analyse the

effects of CETA on democratic decision-making. The Board has interpreted this

to mean the effects of CETA on Swedish government bodies and their ‘right to

regulate’. In this context the ‘right to regulate’ is the ability of the State to pass

laws and take decisions without the risk of having to pay compensation. The

Board analysed these effects in detail in an earlier report.56 As the change from

Investor-State Dispute Settlement (ISDS) to the Investment Court System (ICS)

basically is a question of rules on how and where a dispute should be settled –

and not about the substantive protection – the Board does not consider that ICS

alters its earlier assessment. The Board sent the request for consultation to the

Legal faculties at Gothenburg and Uppsala Universities. The Swedish

Chemicals Agency and Swedish Environmental Protection Agency also

submitted comments.57 The responses are annexed to this analysis.

Both Uppsala and Gothenburg Universities point out in their responses that an

international treaty by its nature restricts the ability of a State to take decisions.

Uppsala University observes that a conflict between a treaty and a domestic

decision does not mean that the treaty has an automatic impact on democracy.

Decisions taken by the Swedish Parliament (Riksdag) are subject to

international law, and if a Riksdag decision conflicts with CETA, it is a matter

of two democratic standards in conflict with each other. Uppsala University

believes, however, that CETA does not restrict Sweden’s right to regulate

in any significant way, and in so far as this right is restricted, it is because

the Lisbon Treaty moved substantial influence over investment-law

agreements from the Member States to the EU itself.

As explained above, in this context the ‘right to regulate’ means the ability of

the State to pass laws and take decisions without the risk of having to pay

compensation. Such monetary compensation may be imposed if the investment

court decides that the State has acted in breach of CETA and if the action

caused the value of an investment to decrease. So the right to regulate is not a

de facto restriction on the ability/right of States to pass laws or take decisions.

The Board’s report focussed on the two key articles ‘fair and equitable

treatment’ and ‘right to compensation in case of expropriation’. These articles

56 National Board of Trade. (2015) The Right to Regulate in the Trade Agreement between the

EU and Canada – and its implications for the Agreement with the USA

http://www.kommers.se/Documents/dokumentarkiv/publikationer/2015/Publ-ratten-att-

reglera.pdf 57 General informal comments on potential environmental effects of the CETA agreement and the

draft analysis from the National Board of Trade, Swedish Environmental Protection Agency;

Analysis of the CETA agreement, Swedish Chemical Agency, ref. 6.1.g-H16-05817.

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have potentially the greatest impact on the State’s right to regulate. The articles

were compared with Swedish law including the European Convention on

Human Rights and Fundamental Freedoms (the ‘European Convention’). The

assumption was that if these articles provided greater protection than CETA,

they could restrict the right to regulate of the Swedish State.

Fair and equitable treatment

The Board’s report showed that the article on ‘fair and equitable treatment’58 in

CETA did not provide any protection that was not already there in Swedish law

and, in many cases, the Swedish constitution. Examples might be the right to a

fair trial, protection against discrimination and protection against arbitrary

treatment. As long as the relevant laws remain in place, and assuming that the

State abides by them, the article does not restrict the right of the Swedish State

to regulate. The basis for protection in the article on ‘fair and equitable

treatment’ which is called ‘reasonable expectations’ has traditionally been a

source of uncertainty as there was an element of discretion in what arbitration

boards considered to be included. In CETA, the element of ‘reasonable

expectations’ has been so severely restricted that, in reality, it offers only

marginal protection for investors. Uppsala University summarises this by

noting that an abstract assessment of the article suggests that it does not

restrict Sweden’s ability to take decisions.

Expropriation

The rules in CETA concerning the right to compensation in the event of direct

expropriation (i.e. where the State directly nationalises private property) are

broadly consistent with Swedish law.59 The section of the article on

expropriation concerning indirect expropriation (such as the revocation of a

licence) might possibly provide greater protection than is given by Swedish

law, partly because there may be areas covered by the article which are not

covered by Swedish law. Apart from the protection against indirect

expropriation provided by Swedish law, there is also a certain protection via the

European Convention on Human Rights (ECHR). Even now, for example,

Sweden can be charged under certain circumstances with breaches of the rules

on indirect expropriation, which has to be considered when Sweden passes laws

or takes decisions.60 Given the limited case-law from Swedish courts and the

ECHR on indirect expropriation, it is unclear what level of increased protection

the ‘expropriation’ article in CETA offers to foreign investors in Sweden. What

case-law there is suggests that the extra protection provided by the article is

58 Article 8.10 CETA 59 Article 8.12 CETA 60 Because Sweden opted to pay compensation to the foreign shareholders for the shut-down of

Barsebäck, there was no call for a process like that currently being pursued by Vattenfall against

Germany.

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very limited. All in all, therefore, the article probably has little impact on

Sweden’s right to regulate. Uppsala University finds no material differences

between the rules on expropriation in CETA and Swedish law. Gothenburg

University emphasises that the wording of this article in CETA makes it clear

that the decrease in value must be substantial and that a requirement for the

impact to be ‘manifestly excessive’ has been inserted; together, these restrict

what may constitute indirect expropriation.

The right to regulate

If a dispute should arise between a State and investors, the investment court

must consider Article 28.3 of CETA, which lays down the right to regulate.

Among other things, it makes it clear that the parties to the Agreement

(Canada, the EU and the Member States) retain the right to regulate in

areas such as public health, security, the environment, public morals and

cultural diversity. Apart from clarifying the right of the parties to regulate in

these areas, the right to regulate is also covered separately in the sections on

environmental and labour law. Gothenburg University emphasises in its

response to consultation that the balance between the State’s right to regulate

and the investor’s legitimate expectations of the State touches on the areas

covered by the right to regulate. Uppsala University considers that Article 28.3

merely codifies the existing legal position and does not add anything.

Joint working group and interpretation

CETA gives the parties the opportunity, via a joint working group61 (Joint

Committee), to lay down binding interpretations of the Agreement that the

investment court must follow. According to Gothenburg University, this results

in effective system control, which safeguards the right to regulate for

‘legitimate public policy objectives’. The working group also reduces the risk of

the parties not ‘daring’ to legislate (so-called ‘regulatory chill’). Uppsala

University points out, however, that the working group could theoretically

imply that Sweden’s right to regulate is adversely affected in cases where the

position of the Member States, or a majority of them, on a specific issue differs

from Sweden’s, particularly in areas where Sweden has not ceded competence

to the EU. In the latter case, however, it is the relationship to Union law rather

than CETA that affects Sweden’s right to regulate. But the fact that the EU can

be the respondent in a dispute based on Union law is still an improvement

compared to the situation prevailing today.

The investment court and the question of competence

The parties to CETA have provided the investment court with clearer rules to

abide by than was the case in previous investment protection agreements,

reducing the risk of decisions running counter to the intentions of the

61 Articles 8.31(3) and 8.44(3)(a) CETA

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contracting parties. Sweden still has the right to introduce more stringent

legislation concerning chemicals, animal welfare etc. However, such legislation

must come about in a transparent manner and must not discriminate in bad faith

against foreign investors. The legislation must also be based on objectivity, i.e.

the decision must not have been made on arbitrary grounds. In order for Sweden

to be liable for compensation for introducing an arbitrary prohibition, for

example, the investor must also show that the measure was in breach of the

CETA Agreement and resulted in an economic loss.

CETA states that the investment court must consider national law and Union

law as ‘a matter of fact’.62 The investment court cannot judge a piece of

legislation on any other basis than whether or not it conflicts with CETA. In

interpreting Union law, the investment court must follow national practice or

the case-law of the CJEU. If the EU should introduce legislation discriminating

against investors from Canada, this could constitute a breach of CETA. An

investor who has made an investment that has been affected may be entitled to

compensation equal to the loss that the legislation caused, but the EU may still

retain the legislation.

If a permanent investment court should be set up, it could be allowed to apply to

the CJEU for a preliminary ruling. This will not be possible as long as the

investment court fails to meet the requirements of Union law for the formation

of a court, as set out in Article 267 TFEU.63 In the Board’s view, ICS as defined

in CETA does not meet these requirements.

Exactly how the right to regulate will be interpreted by the investment court

remains to be seen. However, it is clear that, in their interpretation, the courts

must consider customary international law, including ´the police power

doctrine’ which gives States extensive rights to take their own decisions without

being liable for compensation.

The question of competence has been raised for decision by the CJEU at the

initiative of the European Commission, through the free trade agreement with

Singapore. The outcome will indirectly affect CETA. This is the same

competence issue addressed by the German Judges’ Association (DRB) in its

critique of TTIP/ICS, where it questioned whether the Commission has the right

to enter into investment protection agreements that result in ICS.64 As the CJEU

62 Article 8.31(2) CETA ‘The Tribunal shall not have jurisdiction to determine the legality of a

measure, alleged to constitute a breach of this Agreement, under the domestic law of the disputing

Party. For greater certainty, in determining the consistency of a measure with this Agreement, the

Tribunal may consider, as appropriate, the domestic law of the disputing Party as a matter of fact.

In doing so, the Tribunal shall follow the prevailing interpretation given to the domestic law by

the courts or authorities of that Party and any meaning given to domestic law by the Tribunal

shall not be binding upon the courts or the authorities of that Party.’ 63 Under Article 267 TFEU, the body must be established by law, it must be permanent, its

jurisdiction must be compulsory, its procedure must be inter partes, it must apply rules of law,

and it must be independent. 64 The DRB uses the same or similar arguments to when they criticised the creation of the

European Patents Court in 2011.

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is to rule on the competence question, the Board sees no reason to carry out a

more in-depth analysis of this issue.

Comments from the Swedish Chemicals Agency

The Swedish Chemicals Agency suggested in its memorandum that the

‘Investment’ chapter of CETA could have a greater adverse effect on the

control of chemicals than the chapters on regulatory cooperation, sustainable

development and the environment. The Agency states, however, that any

assessment as to whether this is the case requires a deeper analysis than the

authority has had the opportunity to carry out. The Board is therefore unable to

judge the extent to which this fear is justified and, if so, how it affects the right

to regulate. The Agency also notes that disputes between investors and parties

to the Agreement may relate to the interpretation of EU rules, public

procurement requirements or the implementation of national rules. The Agency

does not present any more developed argument as to how this might constitute a

breach of CETA and thus have democratic implications. The Board would point

out, however, that in disputes based upon Union law, the EU is the respondent.

Comments from the Swedish Environmental Protection Agency

In its comments to the Board on the ‘Investment’ chapter, the Swedish

Environmental Protection Agency asks whether there is a risk of CETA having

a ‘chilling effect’ on legislative work in the EU. As stated above, the Board has

examined the level of protection that the two key articles give to investors. As

CETA is an internationally binding agreement for Sweden, Swedish authorities

and legislators must assess whether a law or a decision constitutes a breach of

the agreement. But as there is a relatively good match between the

protection conferred by Swedish law and that given by CETA, the Board

finds little reason for decision-makers to hesitate over whether a decision

or a new law conflicts with CETA. The Board therefore considers that

CETA could have at most a marginal chilling effect.

5.6 Services (Chapter 9) The section of CETA concerned with trade in services, like other free trade

agreements and the WTO’s General Agreement on Trade in Services (GATS),

can be divided into three parts: i) basic text with general rules; ii) sectoral

rules; and iii) list of commitments. This analysis highlights the key aspects of

these three parts. It should be stressed that the chapter on trade in services is

predominantly based on undertakings and commitments that Sweden has

already made in GATS and a number of free trade agreements. The text below

indicates whether CETA goes further than what Sweden has earlier committed

itself to.

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General and sector-specific rules

As with other international agreements, the rules in the ‘Services’ chapter of

CETA mean that Sweden undertakes to introduce or repeal a number of laws

and rules. This is not remarkable in itself, as international agreements often

have this aim, but it does of course affect Sweden’s ability to regulate various

service sectors, and hence democratic decision-making. It should be noted that

nothing in the ‘Services’ chapter goes further than existing Swedish law. Many

passages call for a certain kind of adjustment but say nothing about how

Sweden should legislate to meet the requirement.

Below are some comments on provisions that are crucial to the assignment.

Domestic regulation

CETA contains provisions that describe how rules on qualification requirements

and procedures, as well as licensing requirements and procedures, should be

drawn up. CETA does not say what any rules should contain but specifies that

they should be as non-bureaucratic as possible. The aim is to achieve good

governance, and the chapter contains passages addressing arbitrary official

decisions, long waiting times for decisions, unnecessarily high administrative

costs etc. By and large, these are provisions that already exist in Sweden and in

the EU.

The provisions apply only to areas in which Sweden has made commitments.

Conversely, the rules do not apply to health care, educational and social

services, or to services relating to water purification and distribution.

The provisions on domestic regulation may work against bureaucracy and make

things easier for both foreign and domestic companies. They have some impact

on decision-making as they codify how rules are drawn up in Sweden, but they

do not affect the content. Sweden also has similar provisions of its own. Given

the exceptions from the articles on domestic regulation and the fact that

they are only concerned with how rules are drawn up, the Board sees no

direct impact on the environment or health.

Mutual recognition

To safeguard human and animal health, Sweden has a number of requirements

for training and qualifications, e.g. for persons working in health-related

professions. CETA contains nothing to cast doubt on these requirements. On the

other hand, the agreement allows the parties to establish procedures for

recognition of qualifications and so facilitate the exchange of e.g. doctors

between the countries. The rules say nothing about the sectors in which

agreements should be concluded or what these agreements should contain.

CETA merely creates procedures to enable future mutual recognition

agreements. However, if agreements are implemented and result in an

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increased exchange of e.g. doctors, this could have a positive impact on

health. An exchange between the EU and Canada could lead to transfers of

knowledge and the development of new solutions.

Exceptions

Like GATS and other free trade agreements, CETA contains exceptions which

provide that Sweden can introduce measures that conflict with the agreement in

order to protect e.g. the environment and health. These measures must not be

arbitrary or constitute disguised barriers to trade. This is an important safety

valve for countries, and key to discussions of possible effects on the

environment, health and decision-making.

The commitments still allow significant regulatory freedom

Commitments are guarantees of a certain level of openness for foreign

companies.65 In CETA, as in GATS and other free trade agreements, Sweden

has committed a number of service sectors while others are uncommitted, i.e. in

these cases, Sweden gives no guarantee of a certain level of openness.

It is important to understand what these commitments entail. A commitment is

about the possibility for Sweden to i) impose quantitative restrictions and ii)

discriminate between domestic and foreign (i.e. Canadian) companies. If

Sweden makes as far reaching commitments as possible in one sector (full

commitments), Sweden cannot impose any of these quantitative restrictions in

that sector and is not allowed to discriminate between Swedish and Canadian

companies.

Given the freedom of establishment in Sweden and the general attitude to non-

discriminatory legislation that prevails in Sweden, the assumption behind

Swedish law is that these two types of barrier should not exist. There are

obviously exceptions, but the Swedish legal tradition is essentially consistent

with full commitments.

A full commitment therefore means that Sweden cannot discriminate or erect

quantitative barriers. Beyond this, Sweden has full right to regulate. Quality

requirements, environmental legislation and consumer law apply in fully

committed service sectors. Even in fully committed sectors, it is therefore

permissible to amend the legislation provided that Sweden does not introduce

any quantitative barriers or discrimination. It is also possible to apply the

exception rules (see above).

65 Under CETA, Canadian companies selling services in the EU.

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CETA means no liberalisation

In CETA, the EU is using a so-called negative listing method for the first time.

GATS and earlier free trade agreements are based on positive listing.66 The

negative listing method in CETA means that Sweden made significantly more

commitments than in earlier free trade agreements. The new method led to a

thorough review of existing law which took almost four years to complete, with

the assistance of the National Board of Trade.

However, CETA does not entail any new liberalisation at all, only

more commitments. All the commitments in CETA are only bindings

of existing law. So although CETA led to a higher degree of

commitment than earlier agreements, there was no actual change to

Swedish law.

Rather, Sweden has retained a lot of space for regulation – i.e. the

ability to introduce quantitative barriers and discrimination – by not

making commitments in certain sectors. These include e.g. education

and health care within the public medical and education systems.

In the list of commitments, Sweden has an exception for ‘public utilities’.67

These are therefore not covered by the commitments. All subsidies and all

service activities regulated at the municipal or country council level also

fall outside the commitments.

In this context, we should also mention the ‘ratchet clause’ in the Agreement.

This clause applies to services where Sweden has made commitments with

some kind of restriction (i.e. only partly opened up). In the event of any future

liberalisation brought about by amendments to Swedish or European law,

Sweden will automatically be committed to the new, more liberal, level of

openness.68 The ‘ratchet’ does not apply to the services that Sweden has not

included in the list of commitments (such as services within the public health

care and education systems). The clause does however imply a restriction on

decision-making in that Sweden automatically gives an international guarantee

of openness in the event of a legislative amendment. In GATS and earlier free

trade agreements, this does not happen automatically and would only do so if

the agreements were renegotiated in the future.

66 Negative listing means that a country assumes that full commitments apply in all sectors but

that the commitment lists contain restrictions on this general openness. Positive listing is the

reverse; a country assumes that no commitments have been made (the country is closed to

international competition), but opens up to allow competition sector by sector. 67 Public-sector monopolies and companies with exclusive rights. 68 For example, Sweden has different residential requirements for board members and has made

commitments in CETA (and GATS) saying that these apply in Sweden. If Sweden should change

our laws and remove this reservation, the new situation would become our commitment towards

Canada, i.e. we automatically commit ourselves not to impose a residential requirement.

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Specific commitments

Below is an analysis of the commitments for some key service sectors.

The selection has been made in light of the focus of the assignment on the

impact on the environment, health and democratic decision-making.

As stated above, it is true of all of the commitments below that they do not

demand any legislative changes. As most they are the binding commitments

covered by already existing law.

Professional services

Professional services include a number of different occupational categories.

This analysis focuses on: i) pharmaceutical services, ii) medical, dental and

nursing services, and iii) veterinary services.

Pharmaceutical services include the operation of pharmacies, mobility for

pharmacists and cross-border trade in pharmaceutical products. Here, Sweden

opted not to make any commitment of openness because liberalisation of the

service was relatively new. However, Sweden has an undertaking to revisit the

sector five years after CETA enters into force and then to decide whether to

commit the sector. Sweden (along with other Member States) also has a

restriction to the effect that remote selling can only take place within the EU

(and not to/from Canada).

Medical, dental and nursing services and veterinary services are equated in

CETA with services such as health centres and dental clinics other than

hospitals and similar services. Here, Sweden has made full commitments and is

not allowed to have any quantitative barriers or discriminatory rules. Sweden

has already made this commitment in GATS. Note that, as mentioned above,

subsidies fall outside the commitment and Sweden is free to regulate

concerning e.g. quality requirements.

Health care and educational services

Health care services are mainly health care-related services provided in

hospitals. They also include e.g. occupational health services and analysis

services. Educational services include education from pre-school to adult

education and private commercial training services. For both health care and

education services, Sweden has exceptions covering all services that fall within

the public health care and education systems or receive some form of public

funding. Nor do the commitments apply to regulation at the municipal or county

council level (which includes Swedish hospitals). Sweden has therefore not

made any commitments within these sectors.

There is however an exception for purely privately financed health care and

education services. This is the first time that Sweden has made

commitments for the privately financed part of the health care and

education sectors.

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Environmental services

Sweden has essentially full commitments for environmental services, except for

water distribution where no commitments have been made. These commitments

follow our commitments under GATS and earlier free trade agreements.

Distribution services

Here the focus is on alcoholic beverages.69 Sweden has an exception for

Systembolaget and retail sales of drinks above a certain level of alcohol. For

other types of distribution of alcoholic drinks, Sweden has made full

commitments. The same exception can be found in GATS and other free trade

agreements. CETA thus confirms the existing arrangement.

Transport services

Sweden had made commitments for all modes of transport, including maritime,

railway, road and air transport. Aviation rights are not covered by CETA (or by

GATS) and air transport only include various support services.

Maritime transport is the only form of transport for which cross-border

commitments have been made, i.e. where Sweden agrees to allow service

supplies from Canada to Sweden. In other cases, the commitments cover the

ability of Canadian companies to establish themselves in Sweden. Flagging

rules and rules concerning the nationality of ships’ crews are outside the

commitments. Cabotage70 (for all modes of transport) also falls outside the

commitments.

The EU-Canada SIA report71 notes that the liberalisation of transport services

will lead to increased emissions. This conclusion is based on an incorrect

assumption, which is that liberalisation of the services is the reason for the

emissions. It is rather the increased trade in goods, which in turn require more

transports within Sweden and between Sweden and Canada, which is the cause

of the emissions. The CETA commitments which only commit already open

trade in services do not in themselves contribute to increased transports.

Effect of the commitments on health, the environment and decision-making

In the service sectors where no commitments have been made (e.g.

pharmaceutical services, the public health care and education system and air

transport), CETA has no impact on the environment, health or decision-making.

In other cases, CETA has only confirmed what was already applicable law, and

coincides with commitments that Sweden has already made in a number of free

69 Medicines are covered under pharmacy services; see above. 70 Freight transport 71 Sustainability Impact Assessment, http://ec.europa.eu/trade/policy/policy-

making/analysis/sustainability-impact-assessments/assessments/#study-geo-14

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trade agreements and in GATS. Private educational and health care services are

an exception because Sweden is for the first time including its already open

markets in a free trade agreement. What is the effect of these commitments?

In the short term, a commitment is unlikely to lead to a large influx of Canadian

operators into the Swedish market. In the longer term, however, the

commitment could lead to an influx of Canadian providers of these services. If

they bring new and better knowledge, innovations and new solutions, this could

possibly have a positive impact on the environment and health. This is

particularly true of the commitments on environmental services.72

When it comes to regulatory space, it will be harder to introduce quantitative

restrictions and discriminatory measures (apart from e.g. subsidies). This

applies, however, in most cases already through GATS and other free trade

agreements.

5.7 Regulatory cooperation (Chapter 21) The Board previously concluded that the outcome of the CETA negotiations

could be seen as acceptable to Sweden as the agreement presents an overall

approach to regulatory matters and addresses the key issues relating to barriers

to trade.73 At the same time, the fact that the free trade agreement regulates non-

tariff barriers to trade and regulatory cooperation raises questions as to whether

and, if so, how these parts of the agreement could affect European and national

legislative work, e.g. in relation to the environment and chemicals.

According to the final text of the Agreement, the following rules apply to

regulatory cooperation as governed by Chapter 21:

Article 21.3 of the agreement sets out the objectives of regulatory cooperation,

which are (a) to contribute to the protection of human life, health or safety,

animal or plant life or health and the environment by leveraging international

resources in areas such as research and risk analysis to address various

regulatory issues and disseminating information used to identify, assess and

manage risks; (b) to build trust and mutual understanding of each other’s

regulatory governance and exchange experience in order to improve the

planning and development of regulatory proposals, promote transparency and

predictability in the establishment of regulations and reduce unnecessary

regulatory differences. Another objective is (c) to facilitate bilateral trade in a

way that reduces unnecessary differences in regulation and identifies new ways

of cooperating in specific sectors Finally, (d) to contribute to the

competitiveness of industry in a way that minimises administrative costs to

72 Compare the conclusions in the EU-Japan SIA, where the report finds positive aspects to the

commitments in this sector. 73 See report from the Board, ref. 2014/01443-5, p. 11.

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companies e.g. from duplicative regulatory requirements and consequential

compliance costs.

According to Article 21.6, a Regulatory Cooperation Forum will be set up. This

forum will act as a voluntary cooperation mechanism for the exchange of

experience and information between the supervisory authorities and to identify

areas where they can collaborate. It is important to remember that the forum

has no power to amend existing provisions or develop new legislation. The

forum will merely provide support to legislators and supervisory authorities. It

should not in any way restrict the decision-making rights of the supervisory

authorities in the Member States or at the EU level. The Swedish Chemicals

Agency points out that the new forum could cause resources, such as experts, to

be moved from the development of EU chemicals legislation and international

conventions to bilateral processes such as discussions and negotiations.74 On the

other hand, the Agency sees no perceptible risk of current or future rules on

chemicals providing a lower level of protection. The Board reiterates that the

purpose of the forum is to improve legislation by exchanging knowledge and

sharing information and enabling joint solutions to be identified. Neither side

can be forced into solutions that it does not want because regulatory cooperation

is not based on joint decision-making, so there is no call for negotiations. The

cooperation will neither change existing rules nor develop new legislation.

Moreover, there is already bilateral cooperation on environmental matters

between the EU and Canada, in which e.g. rules on chemicals and the

application of regulations are discussed and where the parties have

stressed the importance of cooperation on environmental and climate

issues.75 The Board therefore believes that there is little risk of resources

for the development of EU legislation being moved to bilateral processes.

European or national authorities can thus take account of each other’s

knowledge and information in drawing up new rules. This could lead to more

effective rules from a socio-economic perspective, including environmental

protection and human and animal health.76 Nor will CETA alter the

procedures in place today to produce national legislation. Regulatory

cooperation should therefore be seen as a further resource to bring about

better rules – nationally, regionally and globally – even though this may in

practice lead to an extended legislative process. However, this will be for a

good reason – improved rules e.g. to safeguard the environment – and only

if the decision-makers choose to take these views into consideration.

74 Analysis of the CETA agreement, Swedish Chemicals Agency. 75 This cooperation is described in Canada’s ‘Initial Strategic Environmental Assessment -

February 2012’, page 42. 76 See e.g. Article 21.4(s), which mentions the exchange of information and experience in the

field of animal welfare.

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5.8 Animal welfare (Chapter 21.4) Animal welfare is an important issue within the EU, reflected for example in

Article 13 of the Treaty on the Functioning of the European Union, which states

that full regard should be paid to the welfare requirements of animals in

formulating and implementing Union policy in a number of different areas. The

EU has had a strategy for animal welfare issues for a number of years, including

international work. When it comes to free trade agreements, the EU follows the

strategy in striving to include cooperation on animal welfare. This is to reduce

the long-term differences in production conditions between the EU and third

countries and so improve the competitiveness of European producers.

Like many other EU free trade agreements, CETA contains a commitment to

promote bilateral cooperation on animal welfare. This commitment can be

found in Article 21.4(s) in the chapter on regulatory cooperation. The EU and

Canada have agreed to exchange information, expertise and experience in the

field of animal welfare in order to promote collaboration.

Sweden sets great store by including animal welfare in the EU’s free trade

agreements as this can help to promote increased engagement in the issues in

other countries and contribute to improved global animal welfare in the long

term. It is therefore positive that CETA contains a commitment to cooperate in

this area, although the text is not very developed. In assessing the Agreement, it

is important to recognise that the EU and Canada are already cooperating on

animal welfare in a Working Group on Animal Welfare under the veterinary

equivalence agreement. This working group was set up in 2007 by the Joint

Management Committee (JMC). It has not been possible in this assignment to

evaluate how well this cooperation has worked so far. According to information

from the Swedish Board of Agriculture, the most recent meetings of the JMC

under the veterinary equivalence agreement have discussed the terms of

reference for the working group going forward.

The cooperation undertaking in CETA will therefore not mean that a new

partnership on animal welfare has been established between the EU and

Canada. The Swedish Board of Agriculture notes that it should be seen as a

good thing that cooperation between the EU and Canada in this area is

being formalised through CETA. The significance of bilateral cooperation on

animal welfare will depend on the engagement and ambitions of both parties in

this matter. As things stand, it is hard to judge what results might be achieved.

As noted above, however, the EU’s ambition for bilateral cooperation in the

animal welfare field is to reduce the long-term differences in production

conditions between the EU and third countries.

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5.9 Trade and sustainable development

(Chapter 22), Trade and labour (Chapter 23)

and Trade and environment (Chapter 24) CETA also contains chapters on trade and sustainable development, trade and

labour, and trade and environment, which link the Agreement to the EU’s

overarching goals for sustainable development and specific goals for

employment, the environment and climate change. The Board previously

concluded that the impact of the three chapters on sustainable development was

acceptable to Sweden, although the division into three different chapters was

felt to be unnecessary, even if this did not affect the substance.77 It is striking

that the CETA agreement does not contain a separate chapter on energy (unlike

TTIP, where a separate chapter on energy is proposed).78 The Board has also

noted that the definition of raw materials is different from the equivalent

proposal in TTIP.79 With regard to the section on labour, the Board noted that

Sweden had had several comments incorporated, along with a reference to the

ILO Declaration on Social Justice for a Fair Globalisation and a link to social

sustainability.

Because of the short response time, the Board has not been able to carry out a

more in-depth analysis of the three chapters in terms of their possible effects on

the environment, human health and democratic decision-making. On the other

hand, the Swedish Chemicals Agency did submit comments on the chapters on

‘Trade and sustainable development’ and ‘Trade and environment’, which are

reproduced below.

Chapters on ‘Trade and sustainable development’ and ‘Trade and environment’

In these chapters, the EU and Canada affirm that increased cooperation in

environmental matters should help to promote sustainable development and the

two countries’ environmental work.

Article 24.3 provides for the parties to retain the right to define levels of

environmental protection and to follow multilateral international environmental

agreements. The parties are urged to maintain high levels of environmental

protection and to strive to further improve legislation and policy and the levels

of protection they are based on. In Article 24.4 the parties affirm the importance

of multilateral environmental agreements and of mutual support between trade

and environmental policies, rules and measures. Under Article 24.5, the parties

77 See comments by the National Board of Trade on the final text in the CETA negotiations, ref.

2014/01443-5. 78 The Swedish Environmental Protection Agency, which the Board worked with, wondered

whether there was a risk of restrictions on bio-energy as the EU and Sweden might have different

views on export matters. 79 Comments by the National Board of Trade, ref. 2014/01443-5.

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are to ensure that environmental law is not set aside to promote trade or

investment.

The Swedish Chemicals Agency states in its reply to the Board80 that these

chapters clearly highlight the importance of ensuring that the purpose of

the trade agreement, to promote trade and investment, does not lead to any

reduction in the level of protection afforded by environmental laws.

Article 24.8 introduces a form of precautionary principle without using the

term, by acknowledging that the lack of full scientific certainty should not be

used as a reason for postponing cost-effective measures. The Agreement also

states that trade should favour environmental protection, e.g. by promoting

trade and investment in environmental goods and services and working to

eliminate non-tariff barriers to trade in these goods and services, particularly

those that are relevant to climate change mitigation, and trade and investment in

goods and services related to renewable energy.

The Swedish Chemicals Agency also notes that the agreement creates a

relatively significant ‘mechanism’ for cooperation in trade-related

environmental matters. The Agency believes that formalised cooperation

could indirectly slow the development of EU chemicals legislation and

international conventions.

In summary, the Swedish Chemicals Agency finds that Chapters 21 (Regulatory

cooperation), 22 (Sustainable development) and 24 (Environment) mainly

describe how the parties should reduce the risk of new barriers to trade and

investment appearing through different pieces of legislation being developed

independently of each other. The purpose of the cooperation is to produce both

better and, in the long term, more similar rules. The Swedish Chemicals

Agency concludes with a general view that these three chapters do not in

themselves carry any perceptible risk of current or future rules on

chemicals providing a lower level of protection.

80 Swedish Chemicals Agency analysis of the CETA agreement; memorandum attached.

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This analysis was decided by the Director-General Anna Stellinger in the

presence of the Head of Department Oscar Wåglund Söderström and the Senior

Adviser Anna Sabelström, rapporteur. The Senior Advisers Kristina Olofsson,

Magnus Rentzhog and Annika Widell and the Advisers Jonas Hallberg and Lina

Kamara also participated in the final drafting.

Anna Stellinger

Anna Sabelström

Annexes:

Opinion from the Uppsala University

Opinion from the Gothenburg University

Comments from the Swedish Chemicals Agency

Comments from the Swedish Environmental Protection Agency