Canada struggles to maintain bank protections
OTTAWA - A leaked draft of part of the Canada-Europe trade talks shows that Canada's vaunted banking system is on the negotiating table.
The Canadian Press has obtained the Feb. 1 version of the services chapter of the Canada-Europe trade deal that Europe has circulated to its member states.
It shows Canada is struggling to maintain the traditional stringent standards it imposes to ensure financial stability and protect financial services in Canada from foreign control.
"EU does not want to exclude financial services from the scope of performance requirements," says notes written into the draft text.
The documents also show Canada is resisting European Union attempts to weaken oversight of financial institutions -- leading to a heavily contested text that is one more obstacle to completing an agreement with Europe soon.
Both sides want more access to each other's financial services markets.
For Canada, the European market is a huge opportunity for big insurance companies located mainly in Ontario. And Germany in particular has been pushing for more financial services opportunities in Canada.
But the documents show Canada is taking a cautious approach, and will only allow a more open market if Canadian authorities can block business activity that would put the financial system at risk. Canada's caution is bumping up against an aggressive European drive for investor protections that have no strings attached.
Canada wants the text to say: "A party may prevent or limit transfers ... through the equitable, non-discriminatory and good-faith application of measures relating to maintenance of the safety, soundness, integrity or financial responsibility of financial institutions or cross-border financial service suppliers."
But that section of text is in bright red, indicating -- like much of the financial services portion of the agreement -- that the EU has not yet agreed.
"What the (European) Commission is doing: it feels obliged to wrestle Canada down," said Jan Kleinheisterkamp, a senior lecturer in the law department of the London School of Economics, who follows the investor-protection discussions closely.
Canada also wants to set up a special mechanism that would have governments resolve any disputes that arise from new forays into each other's financial services sector.
The draft shows the EU is somewhat open to a version of this idea, but has deep reservations for fear Canada will use the mechanism as an excuse to block legitimate European investment. European officials have not agreed to many parts of the Canadian text in this area.
"EU has concerns about the potential for abuse of such a provision if it were to be used for reasons which are not prudential," notes to the draft text say.
"EU has concerns about the possibility to backtrack on GATS commitments," the notes add, referring to the general agreement on trade in services, a World Trade Organization agreement that Canada and the EU have both signed. …