On Thursday 14th June, Italy’s new agricultural minister, Minister Gian Marco Centinaio, was reported as saying that the Government of Italy does not intend to ratify the Comprehensive Economic and Trade Agreement (CETA) concluded between Canada and the European Union. In a newspaper interview, he offered the explanation that Canada’s commitments under the CETA do not provide sufficient coverage of Italian products in terms of Designation of Origin or Geographical Indication protections. See, for example: Francesca Landini, “Italy won’t ratify EU free-trade deal with Canada: farm minister”, Reuters (14 June 2018), available online at https://www.reuters.com/article/us-italy-minister-canada-trade/italy-wont-ratify-eu-free-trade-deal-with-canada-farm-minister-idUSKBN1JA0TR.

What would it mean for the CETA if Italy takes the decision not to ratify the Agreement?

The short answer is that this is unlikely to have any significant impact on the status quo. The majority of the CETA has already entered into force (as of 21st September 2017) and currently applies to trade in goods and services between Canada and the European Union (including in the context of government procurement), labour mobility (i.e., temporary entry and stay of individuals for business purposes), intellectual property rights, and other subject matters. These elements of the CETA will remain in force regardless of the decisions taken by individual EU member states concerning ratification.

The reason for this is that most of the rights and commitments under the CETA fall within the exclusive competence of the European Union. The provisions that cannot enter into force until each of the EU member states ratify the Agreement are generally limited to those dealing with investment protection and the establishment of an international investor-state dispute settlement (ISDS) tribunal under Chapter 8. As the ratification process in each of the member states can take several years, the parts of the CETA that fall exclusively under the European Union’s competence were “provisionally applied” right away — i.e., after ratification by the European Parliament and the Government of Canada — so that businesses could immediately begin taking advantage of the benefits. For more information on these points, see: European Commission, “CETA explained”, available online at http://ec.europa.eu/trade/policy/in-focus/ceta/ceta-explained/ (in particular, under the headings “What is provisional application?”, “Which parts of CETA will the EU provisionally apply?”, and “How will CETA protect investments?”).

Thus, a decision taken by Italy not to ratify the CETA will likely only affect the above-referenced investment provisions.  The free trade provisions that are currently in force are unlikely to be compromised, at least not directly. This does not mean, however, that such a decision is not without meaning or power. The CETA investment chapter is important to the European Union in its efforts to establish a permanent international ISDS “court” similar to the World Trade Organization’s Dispute Settlement Body and to advance a modern ISDS regime that includes greater protection for governments to regulate in the public interest.

Tereposky & DeRose LLP regularly provides advice on the interpretation and application of the provisions of international trade agreements, including the CETA, the NAFTA, and the forthcoming CPTPP.  Should you have any questions regarding potential opportunities under these trade agreements or any other trade related issues, we are at your disposal.