EU-Canada trade relations (debate)
President
The next item is the debate on the question to the Commission on EU-Canada trade relations, by Vital Moreira, on behalf of the Committee on International Trade - B7-0213/2011).
Vital Moreira
Madam President, as Chair of Parliament's Committee on International Trade, it falls to me to table an oral question to the Commission concerning the negotiation of an economic and trade agreement with Canada.
Two years after they started, in May 2009, there are indications that these negotiations may be concluded in the course of the current year. Given the progress of the negotiations, now is therefore an ideal moment to get information from the Commission concerning some of the most important points in these negotiations.
The text of the question adopted by my committee is well known and, to save me from reading it, Madam President, please allow me to assume there are copies.
As we know, since the Treaty of Lisbon, Parliament has had the right to be informed on all stages of negotiation for international agreements. This obviously includes international trade agreements, which constitute an exclusive competence of Parliament, and for which parliamentary scrutiny is more justified.
It is important to mention that the Commissioner for Trade, Mr de Gucht, and the Directorate-General for Trade have fulfilled this duty of providing information to the parliamentary committee which I chair, in this and other cases. It is nonetheless important to share information with Parliament and the public on the most important issues at stake, given the progress of the negotiations in this instance. This includes matters which are very sensitive for Parliament and the European public such as, for example, the issue of the famous tar sands and Canadian opposition in the World Trade Organisation to the European ban on products made from seals.
We therefore believe this oral question and the developments that it may entail to be of particular importance. It only remains to inform Parliament that this oral question is accompanied, as usual, by a resolution on the same issue which will be voted on this Wednesday. Both initiatives are testament to the great importance that the Committee on International Trade and, in our view, Parliament, should place on this matter.
Máire Geoghegan-Quinn
Madam President, Commissioner de Gucht is currently absent and has asked me to make the following statement in response to the parliamentary question from Vital Moreira.
Today's plenary debate on the negotiations for a comprehensive economic and trade agreement with Canada is very welcome. So far, these negotiations have run smoothly, and it should be possible to conclude the bulk of an agreement before the end of the year, with a formal conclusion early in 2012.
However, we are also entering a stage of the negotiations where things are getting more difficult: in particular, because some of the outstanding issues are related to inherent differences in our economic structure or regulatory systems.
This is a tremendously beneficial agreement for both parties, with positive impacts on business, investors and consumers alike, thanks to the very broad scope envisaged. In material terms, we calculate that this could bring an additional EUR 20 billion per year to both economies. Where EU offensive interests, such as provincial government procurement, lie in areas of provincial competence, we have been assured that the provinces and territories of Canada will be committed to the negotiations and to the implementation of the agreement.
In relation to your particular concerns, EU Member States have now reached an understanding on the usage of the so-called 'negative list' approach. A key reason why a trading partner like Canada prefers a negative list is that it provides much greater transparency and legal security, because it makes very clear which services are excluded from market opening, including also where monopolies and exclusive rights may exist in the public sector. Hence, the negative list approach in no way prejudices the ability of an EU Member State to continue to maintain the right to retain a monopoly in the future for a particular service.
It remains up to the EU and Canada to decide what commitments it is willing or not to undertake in each sector, including with regard to public services or other services where future policy flexibility is important.
EU governments will continue to have the option of imposing universal public service obligations on private operators and of subsidising public services as necessary. Trade agreements do not impose privatisation or deregulation obligations, and it will be no different for this CETA, which will include provisions on sustainable development covering economic, environmental and social aspects. Such provisions will be fully integrated within the trade agreement.
We note the concerns that have been expressed with regard to the WTO panel on the EU's seals ban and on Canadian oil sands. While we understand these concerns, we believe that there are good reasons to keep these processes separated from the CETA negotiations. This being said, the negotiation - as in the case of any other trade negotiation - does not in any way impede the ability of the EU or its partner countries to draw up and implement environmental measures.
More specifically, as regards the Fuels Quality Directive, I want to make it absolutely clear that the negotiation and a future agreement does not and will not represent any negative interference with regard to the implementation of that directive.
Honourable Members, we are moving closer to an agreement which will help to provide a much-needed boost to the economies of the EU and Canada. We are looking forward to hearing Parliament's views during the debate today and the resolution that you will subsequently adopt.
Georgios Papastamkos
Madam President, the resumption of negotiations, at Canada's initiative, to upgrade bilateral cooperation under a comprehensive economic and trade agreement is a positive move, as the committee chair, Mr Moreira, pointed out. However, there is one issue that concerns us, which has to do with the federal structure of Canada. I refer to the need for the unimpeded and uniform application of the agreement by the individual provinces.
Within the framework of trade relations between the two partners, important offensive and defensive agricultural interests, among other things, are at risk. On this point, I should like to voice the opinion of Mr Jeggle, who is absent today. Priority is being sought for full protection for geographical indications, given the increasing counterfeiting of quality EU agricultural products. Canada, like other states that protect geographical indications under trademarks, is, as we all know, opposed to the demands made by the EU on this point at the Doha Round negotiations. The different legislation of the individual provinces is an additional problematic aspect.
As for the question of genetically modified organisms, I would remind the House that the Union and Canada have signed a mutually acceptable solution to resolve this difference. Canada has agreed to resolve the difference in exchange for a bilateral regulatory dialogue on biotechnology issues. I call on the Commission to defend the high level of protection provided by the European regulatory framework during the course of the negotiations under way.
Finally, I would like to mention the Canadian state trading companies in the agricultural sector which, as we all know, have broad competences and can act as monopolies. Specific commitments need to be entered into on the Canadian side. This, too, is a demand which was highlighted by the Union during WTO negotiations.
David Martin
on behalf of the S&D Group. - Madam President, my group can see many benefits in an ambitious, comprehensive, economic trade agreement with Canada. However, we have four red lines.
Firstly, on the extraction of oil sands, which damages local diversity, we insist on the EU's right to use the Fuel Quality Directive to inhibit their use. I was pleased to hear what the Commissioner had to say on that matter.
Secondly, we find it hard to imagine Parliament approving a trade deal with Canada while Canada pursues a challenge, through the WTO, on the EU's trade ban. Here I cannot accept the Commissioner's point of view that we should keep the two matters separate. I think they are linked in the eyes of the voters, and they are linked in my eyes. I would certainly not vote for an agreement unless this dispute is settled before we reach the final stages of this deal.
Thirdly, we would not be able to accept any limitation on Canada's ability to use the TRIPS flexibilities to export cheap generic medicines to developing countries. This is an important source of generics for developing countries, and we should not bow to pressure from the pharmaceutical industry to make it more difficult for Canada to provide generic medicines.
Fourthly, we cannot accept a deal that does not address the different standards and preferences from local SMEs and state monopolies in Canada. This was a point that Mr Papastamkos was making about the difference between provincial and federal regulations. They must be dealt with before this agreement comes to conclusion.
That said, if we find that the final text deals with these issues and is ambitious in reducing tariffs on EU spirits, on EU machinery, on EU automobiles and other areas, we will be happy to back such a free trade agreement. But we do insist that the four items I have mentioned are red lines and have to be dealt with properly in these negotiations.
Metin Kazak
Madam President, Commissioner, ladies and gentlemen, the resolution tabled by the Committee on International Trade clearly expresses support for the ongoing negotiations with Canada on concluding the comprehensive economic and trade agreement. Canada is one of our oldest and closest trading partners, currently the 11th biggest, and the potential benefits from deregulating bilateral trade are obvious, including from the study carried out by the Commission and the Canadian Government in October 2008.
The private sector in the European Union and Canada has also expressed strong support for concluding such a comprehensive agreement, even though a number of challenges still remain, taking into account the lofty ambitions declared during the negotiations.
I believe that the first thing we need to do is to assess the impact, which will shed some light on the pros and cons of such an agreement. Secondly, how realistic are the Commission's expectations that negotiations will be concluded by the end of 2011? Can the Commission also guarantee that the final agreement will include a chapter on sustainable development, in keeping with Parliament's requirements? Will this chapter include labour standards, the obligations associated with multilateral environmental agreements, as well as an effective mechanism for enforcing them?
Has a plan already been outlined enabling the Commission to resolve the issues relating to market access? Can the existing differences in terms of economic structures and regulatory systems be overcome in the near future?
Does the Commission intend to accept the application of the principle of reciprocity as part of the existing legal protection methods when it comes to resolving trade disputes? Does the Commission think that, in the long run, the implementation of the 'negative list' approach to deregulating services can set a precedent for other, future negotiations too?
These are questions that naturally require answers, which I am counting on receiving.
Keith Taylor
on behalf of the Verts/ALE Group. - Madam President, as others have mentioned, Canada is indeed a solid trading partner for the EU. The abolition of the tariffs now being negotiated in the CETA framework is, on the whole, acceptable to our group.
But sadly, CETA does come up with some other demands and political goals which we find deeply worrying. I will mention two of the most troublesome, the first being the negative list in the negotiations on trade liberalisation. Normally, in negotiating FTAs, you name the services that you are ready to liberalise. But under these proposals, all services are open, except those specifically excluded at the outset. As Greens, we think there are some services, particularly those dealing with the general public interest, which are too sensitive and too potentially vulnerable to be negotiated under this 'negative list' approach. We have lodged some amendments and we are looking forward to some support from fellow Members.
The other area of concern is around procurement. We are concerned about the impact that CETA will have on procurement. To give just one example, the Ontario Green Energy Act would be illegal under CETA. That Act promotes the production and feeding of renewable energies and directs investments into local economies. That is just one example of how CETA will interfere with domestic policy in Canada.
Although Canada is one of our oldest trading partners, we cannot deny that occasionally, we do have differences of opinion. Canada is, for instance, opposed to the EU's GMO policies. It is starting WTO action against the EU import ban on seals, in addition to its barbaric annual seal cull, and do not forget that it is fighting the EU Fuel Quality Directive to protect its exports of tar sands to the EU.
I believe that it is important that we voice all these concerns and urge the Commission to remain firm in the principles and policies of this place.
Paul Murphy
on behalf of the GUE/NGL Group. - Madam President, the negotiations for the EU-Canada trade agreement have been driven by major European and Canadian multinationals who want market access to vital public services so that they can profit at the expense of workers and consumers. This agreement would be a charter for privatisation, particularly in terms of water, telecommunications and electricity. The investment chapter would, outrageously, give corporations the right to sue governments when social or environmental policies cut across their profiteering.
Canada's tar sands have become a playground for big oil companies like BP, Total and Shell. These oil deposits produce more than three times the carbon emissions of conventional oil and their exploitation is also extremely damaging to the local environment and a threat to the First Nations communities who live in the region.
This trade agreement, I understand, could potentially cut across moves to stop this oil being imported into Europe. There is an urgent need now for united action by the European and Canadian trade union movement, with environmental and indigenous activists, to fight together and resist this proposed agreement.
William  Dartmouth
on behalf of the EFD Group. - Madam President, for the Commission and Parliament here to seek to use a proposed trade agreement with Canada to influence that country's internal affairs is simply wrong. If the Canadian Government considers that it is environmentally acceptable and economically advantageous to develop their tar sands, that is entirely a matter for them. Indeed, we should all welcome this enhancement and diversification of global energy.
As far as the British national interest is concerned, the coalition government consistently neglects trade relations with the Commonwealth, of which Canada is a founder member. To paraphrase the commentator, Ruth Lea: because the Trade Commissioner negotiates trade deals for the whole of the EU, the brutal truth is that EU membership constrains Britain's economic prospects.
Andreas Mölzer
(DE) Madam President, we can be extremely pleased that our long-standing relations with Canada, one of our oldest and closest trading partners worldwide, have been defined by common roots and values.
As we know, in recent decades, a whole series of framework agreements for trade and economic relations have been concluded, from sectoral agreements right through to the most diverse trade initiatives. The EU-Canada comprehensive economic and trade agreement (CETA), with regard to which there are probably only the last few minor details that need to be worked out, will probably enter into force in the near future.
Although the predecessor to this agreement was never actually concluded, this time, everyone involved seems to be confident. The Canadian chief negotiator even admitted at the start of the year that this agreement was a top priority for Canada. As the second largest trading partner, the EU is clearly intended to be established as a counterbalance to the US market and, conversely, as far as Europe is concerned, Canada represents a gateway to the NAFTA economic area.
If the experts prove to be right, the conclusion of the CETA could increase bilateral trade between the European Union and Canada by 20% by 2014. Those are extremely appealing prospects, particularly in economically strained times. If we consider that, after Saudi Arabia, Canada has the largest oil reserves, this is probably also of strategic significance in the context of European efforts to achieve more energy security, and that is something that we should definitely bear in mind.
Christofer Fjellner
(SV) Madam President, Canada is one of our most important trading partners. Therefore, this is also one of the most important free trade agreements. It brings considerable advantages, and all studies show that it could increase trade significantly. Many fellow Members are choosing to focus on threats and risks and to make this into a problem, but I think it is important for us to take a step back and focus on why we want these negotiations.
The reason is that we can see the incredible potential that can be realised in growth, trade and development. That is something that we all welcome. I have very high hopes of this agreement, as it is so ambitious. We often say that all of our free trade agreements should be ambitious, but this one really is. This agreement has the potential to create more extensive free trade and more free borders between Europe and Canada than currently exist between Canada and the United States. That is worth emphasising. It would be an historic achievement if we succeeded in bridging the Atlantic with regard to free trade with Canada.
I would like to mention the trade in services in particular. It is precisely this trade in services that several people have made out to be problematic, but this is clearly one of the most important strategic areas we have, particularly when it comes to financial services. I would like to hear the Commission say something about how this part of the negotiations is going, as I know there has been a certain amount of resistance with regard to this area. As I said, it is an important strategic area of interest for Europe.
Finally, I would like to urge the Commission not to let this process drag on. We must ensure that we do not allow the negotiations to slow down. That is what I see as the biggest threat, in other words, that conflicts concerning various side issues take the focus away from the main issue. What is clearly important is to create more free trade. When we started these free trade negotiations, there was a very positive attitude from everyone involved. I therefore believe it is important for us to ensure that we finish in exactly the same spirit and that we do not allow the negotiations to drag on for far too long.
Harlem Désir
(FR) Madam President, Commissioner, ladies and gentlemen, the comprehensive economic and trade agreement negotiated with Canada will strengthen our links with a large and long-standing EU partner country. We welcome this, but we must keep track of all its consequences, not just the benefits it will bring for certain economic sectors or certain major international investors.
In particular, the agreement must respect the social and environmental models of both parties - of the EU Member States and of Canada - and their capacity to continue to legislate in what are sensitive areas for our societies. These are not mere details or points to be left for another day.
As regards public services, the Commission's chosen 'negative list' approach is dangerous. It is far too broad and ill-defined, and we would not like to see it set a precedent. Also, from a general point of view, the chapter on investment must respect both parties' right to legislate in areas such as the environment, public health, employee and consumer rights, industrial policy and cultural diversity, among others. We call on the Commission to exclude sectors such as culture, education and public health from the scope of the agreements. In this respect, and as other Members have said, the intellectual property part should not call into question issues relating to generic medicine production.
As for the environment, we are concerned and call for investment. As regards the impact of the agreement on oil sands drilling, the agreement must not have the effect of weakening European legislation on the application of the Fuel Quality Directive, nor must it limit the possibility for Canada to regulate drilling of its oil sands in the future under its environmental remit.
We also call on the Commission - we are asking the question, anyway - to monitor the impact on the fisheries sector in areas such as St Pierre and Miquelon. These are areas of Europe that could be severely affected by the complete liberalisation of that sector.
Lastly, I echo Mr Kazak in saying that the sustainable development chapter must include social and environmental commitments and, in particular, social and environmental responsibility on the part of large multinationals.
Franz Obermayr
(DE) (The speaker directs a blue-card question to Mr Fjellner under Rule 149(8))
Mr Fjellner has represented all this in a very positive light and he said that we should not allow this process to drag on. In this context, my question is this: How can he have a positive view of the fact that in Canada, an area one eighth of the size of Austria is destroyed each year in connection with the exploitation of these tar sands and the entire livelihoods of the First Nations communities are being taken away? Does he really view this in such an incredibly positive light and is it not also part of Europe's responsibility to impose appropriate conditions in this regard?
Christofer Fjellner
(SV) Madam President, I should like to respond to Mr Obermayr's question. I do not believe that I made any reference to tar sands in my speech, but I think it would be naive to imagine that the entire free trade agreement with Canada should simply revolve around this issue. That would be to lose our sense of perspective. It goes without saying that we should lay down clear environmental requirements in these free trade agreements. That is something that we do in all of our free trade agreements, but we cannot allow the entire agreement with Canada to be reduced simply to negotiations on the issue of tar sands.
Chris Davies
Madam President, it is the intention of the Commission to set default values for the use of tar sands - not just from Canada, but from any source, including Venezuela, for example - for the purpose of reducing the greenhouse gas intensity of fuels, as required by the Fuel Quality Directive.
There has been extensive lobbying by Canada to try to prevent us doing this. I have met the Alberta Energy Minister, who has been doing the rounds, as I am sure others have too. Canada has also been lobbying Member States, and there has been the threat that Canada will take us to the World Trade Organisation if such an arrangement is introduced.
We have to tell Canada to back off. Canada is making a great deal of money out of exploiting its tar sands but it also made commitments under the Kyoto Protocol to reduce its CO2 emissions, and it has reneged on those commitments because of the financial benefits it is getting from tar sands. We do not want a dispute with Canada but we have to insist that we will not shrink from facing inconvenient truths.
Frieda Brepoels
(NL) Madam President, Commissioner, against the backdrop of the ongoing negotiations with Canada, the issue of seal hunting raises its head once again. You even made reference to it yourself. I was the rapporteur for the Committee on the Environment, Public Health and Food Safety a few years back, but I remain an advocate of the ban on trading seal products. I therefore emphatically call on my fellow Members and also the Commission to absolutely not take their eye off this issue.
Around two years ago, we, Parliament, approved a trading ban with an overwhelming majority, despite the immense pressure from Canada on Parliament and the other institutions to water down the legislation. For us, the crucial factor, above all, was the voice of millions of European citizens, who have made known their opposition to this inhumane slaughter.
The ban has not been ineffective. As a result of this piece of legislation, amongst other things, the market pretty much collapsed, as the number of animals killed fell from 217 000 in 2008 to 38 000 this year, while the price of fur also fell from USD 100 in 2006 to USD 15 in 2009. Canada is now trying to penetrate new markets, for example in China, but there, too, voices calling for a trading ban are to be heard. It is thus also regrettable that Canada is still trying to fight this European legislation through the WTO. That is why it is so important that Parliament should again send Canada a strong signal at this point. We will not give up on this piece of legislation, which we worked for for so long, both within and outside the Union. I hope that my fellow Members will tomorrow lend their support in large numbers to an amendment that I have tabled along with a number of other Members.
Helmut Scholz
(DE) Madam President, Commissioner, the negotiations with Canada are being conducted with a country that has a strong economy and a highly developed legal system. It is therefore all the more incomprehensible that the Commission wants to integrate, if not conceal, an investment agreement in this agreement to give undertakings a direct right to take legal action before a special arbitration court. Why ever should an ordinary court not decide on compensation in cases of doubt?
Which courts do you, as the Commission, not have any trust in whatsoever? Is it the Canadian courts or those in the European Union? Do you not see that, with this part of the agreement, you would be discriminating against the local undertakings?
As has already been mentioned by a few Members, my group is also strongly opposed to the Commission's approach of using the agreement to force the liberalisation of services by means of a 'negative list'. This turns on its head the approach that has been taken up to now where the contracting partners define the areas that they actively want to open. We want to retain public services.
I would also ask the Commission to provide an explanation for its rejection of Canada's social and employment policy proposals, which ought to be seen in a positive light for the sustainability chapter. The European Parliament is also calling for the protection of workers, payment of overtime, minimum wages and rejection of social dumping.
Jarosław Leszek Wałęsa
(PL) Madam President, potential benefits for Canada as well as the European Union are obvious and backed up by research, as well as encouraging support from the private sector. This should be commended and further cooperation should be encouraged. However, since we are very aware of environmental issues in Europe, we should be tough and demand, as a matter of principle, that Canada fulfils our rigorous standards. I am very pleased that the Commissioner mentioned this in her presentation.
However, we should not only focus on sustainable development but also consider the extraction of resources which pose a risk to life and health such as asbestos, the use and extraction of which is banned in Europe. In addition, we should note the difference in regulations on genetically modified organisms. This is a particularly sensitive topic in my country, but, of course, the whole chapter on agriculture is important for both sides. It should also be noted that we have an obligation to reduce CO2 emissions.
The final issue, which is no less important, is trade in articles made from seals. This is an area where we should be tough in demanding compliance with our bans. Taking all of these important matters into account, I believe that our economic relations will achieve their full potential because they are supported by both sides. Our Parliament should also encourage this.
Jörg Leichtfried
(DE) Madam President, ladies and gentlemen, I had actually intended to address several points in my speech. I am not going to do that now as I would like to say something else.
I simply do not understand the Commission. It is supposed to be the guardian of European law, including the legislation that we have adopted, but when it comes to the trade agreement with Canada, it says that it is important that some people make a lot of money, but it is not important for European law to remain law. I do not understand how the Commission can say that we do not need to discuss the import ban on seal products in connection with these matters. We are talking about partners here and partners have mutual respect for each other's values, views and interests and do not haul the other partner before a WTO court on account of that partner's values. As far as I am concerned, that is not what trading partners are about. It is evident that if there is no mutual respect and the parties do not share each other's views, then these parties will not be able to work well together in the area of trade. If Canada does not stop its action against the import ban on seal products before the conclusion of this kind of agreement, then, in my opinion, we should not agree to this trade agreement. As I said, good partners do not haul each other before WTO courts on account of their convictions. Good partners work together.
Elie Hoarau
(FR) Madam President, during the negotiations on the Northwest Atlantic Fisheries Organisation (NAFO) agreements, in particular with Canada, the EU head of delegation promised to retrocede the French cod fishing quota to the fishermen of St Pierre and Miquelon. That promise was not kept, and the fishermen, like St Pierre and Miquelon's economy, are today suffering the consequences.
The negotiations currently taking place on an EU-Canada economic and trade agreement must not sacrifice what remains of St Pierre and Miquelon's economy - again. That is why I tabled an amendment on this subject.
I call on the Commission to ensure that the strategic commercial interests of St Pierre and Miquelon are protected at all times during the negotiations. Commissioner, can you assure us of this?
Gianluca Susta
(IT) Madam President, I feel bound to note that a sense of fear and a need to defend European interests still prevail among some Members in this Chamber: in other words, they are on the defensive.
As far as I am concerned, I believe that this agreement with a country with which we have a long-standing bond of friendship is important as long as it is entered into on the right basis, that of true reciprocity, and is a balanced and ambitious agreement. It should not be limited to the elimination of tariff or non-tariff barriers but should represent an opportunity to take a qualitative leap in the elimination of environmental and health policy differences, and I refer, in particular, to the farming sector, the protection of animal species at risk of extinction and particular economic extractive activities that have a significant environmental impact, such as asbestos mining and oil sands drilling, or that restrict access to medicines for the poorest countries.
However, we must be positive in our attitude, not defensive like we were with Japan.
I would therefore emphasise the need to improve reciprocity in terms of the protection of intellectual property, including trademarks, geographical indications and policies for the reciprocal promotion of bilateral investment, aimed principally at innovation and technology and inspired by the positions already taken in this field by the European Parliament.
Madam President, I believe that the numerous bilateral agreements between Canada and the Member States are the best foundation on which to build a robust free trade agreement in the commercial arena, thanks to a friendship that we have already experienced in the UN, the G8, NATO and the International Security Assistance Force in Afghanistan, a friendship based on the ideals of democracy and freedom that characterise Canada and the European Union.
Kriton Arsenis
(EL) Madam President, I, too, should like to raise the issue of tar sands; this is an important issue, because it is the reason why a similar agreement which we already have with Canada, an international agreement on commitments under the Kyoto Protocol, is not being respected. We trust that Canada will take a different stand in the agreement being debated today.
In any event, Canada is fighting to secure free trade and a liberalised system of investments under this agreement for oil mined from tar sands. The environmental impact study for this agreement, which we paid for, does not include an assessment of the impact that liberalisation will have on tar sands. In other words, we have a trade agreement which refers to specific measures for trading oil mined from tar sands and we have an impact study for this agreement which does not include an assessment of the impact of this specific activity.
This makes it very difficult for Parliament to approve any agreement that ultimately transpires. That is because we are talking about the Boreal forests, about a quarter of the world's virgin forests, and this mining activity will put those forests and local biodiversity and first nations at risk.
Elena Băsescu
(RO) Madam President, I think that EU-Canada trade relations are at a crossroads at the moment. Signature of the economic agreement is still under negotiation and the priorities of both parties must be included in the final document.
In this regard, I must highlight the differences in sanitary standards. Achieving consensus would avoid an adverse impact on the European agricultural sector. In addition, the agreement must also take into account the outcome of common agricultural policy reform. Clarifications on the sustainable development chapter are important. The EU has established its environmental standards in accordance with Member States' requirements. Verifying their compatibility with the standards proposed by Canada is vital to ensuring the effectiveness of the final agreement. I think that close attention must also be paid to the impact of the drilling issue and oil surveys on the negotiations. This is why the Commission needs to explain where the Fuel Quality Directive comes in this document.
Seán Kelly
Madam President, unlike the last discussion, which was virtually unanimous in its approach, this is the exact opposite. Many people are very concerned about this proposed free trade agreement. Now free trade agreements, bilateral agreements, are the norm at this point in time and I think we have much more in common with Canada than any differences. They are a democracy. They respect human rights. They speak mainly English and French, European languages, and they are open to take in many people, even from my own country, who cannot find jobs in Ireland.
There are issues, largely concerning seals and tar sands. Obviously, they are important but, at the end of the day, I think that some of the points made here would be refuted by the Canadians - because I am a member of the EU-Canadian delegation and these matters have been discussed and they would have a different perspective - and that is why it is important that we continue to negotiate with them on these issues. But the bottom line is - and nobody referred to it other than the Commissioner - that there is a EUR 20 billion benefit to both economies here if we can work out a free trade agreement. It is worth trying.
(GA) Thank you, Madam President.
Paul Rübig
(DE) Madam President, I would like to congratulate the Commission on conducting these negotiations so intensively. At the end of the day, this is about trade relations, and I believe that environmental and social issues clearly also need to be regulated in separate agreements. Kyoto is a good example of this, where the intention was to improve standards at an international level. Therefore, we should be specific in our negotiations here.
Just as energy policy and the generation of energy is a matter for the Member States in Europe, we must also concede that it should be the Canadians and Canadian democracy that decide how energy is produced there and what environmental impact is ultimately to be taken into account. We ought to strive to ensure that a research programme is set up in this regard to help to enable these resources to be used in a way that is as environmentally friendly and sustainable as possible. Commissioner Geoghegan-Quinn, perhaps you could provide some impetus here to get a tar sands research programme put in place alongside this trade agreement.
Zuzana Roithová
(CS) Madam President, Commissioner, I broadly support the reservations voiced by my colleagues from the Committee on the Internal Market and Consumer Protection. The question is whether they can be resolved in this agreement or, as Mr Rübig said, whether other agreements are necessary. At this point, however, I would like to draw attention to a major problem, which is the ratification of this agreement. For example, the Czech Parliament has already blocked the ratification of a transport agreement, due to the continuing dispute with Canada over the abolition of visa requirements for Czech citizens. This is an extremely serious issue, and there is a risk that ratification of the agreement will be blocked until the Commission is able to resolve the issue properly. I am asking you to take this issue seriously.
Silvia-Adriana Ţicău
(RO) Madam President, Canada is currently the European Union's 11th biggest trade partner, with trade relations between the European Union and Canada accounting for 1.6% of the EU's total external trade in 2010.
In 2010, 26% of the European Union's imports from Canada and 37% of the European Union's exports to Canada related to trade in machinery and transport equipment. I would like to know what impact this agreement is having on the European Union's industrial policy strategy and on its strategy on raw materials and rare earths. With regard to deregulating services, because it was mentioned here, I would like to ask you, Commissioner, what the link will be between this agreement and the agreement on civil aviation safety and the air transport agreement between the European Union and Canada. The aim of both agreements is to make the European and Canadian markets competitive in this area, as they are extremely important for the air transport sector. I would therefore like to ask what the trade agreement's impact will be on other agreements already signed between the European Union and Canada.
George Sabin Cutaş
(RO) Madam President, I, too, wish to emphasise how important it is to conclude the negotiation of the European Union-Canada economic and trade agreement, thereby strengthening trade and economic links, which are already considerable, and yielding beneficial effects. However, during the negotiations, the European executive must strive to encourage an ambitious trade agreement, which will support fair trade and contain legally binding social and environmental protection elements.
The agreement must not jeopardise the Union's ability to review the Fuel Quality Directive and to refuse to import oil extracted from oil sands, the exploitation of which generates more carbon dioxide than the conventional oil extraction method, thereby entailing a major harmful environmental impact. By refusing this kind of oil, the European Union would retain its credibility in terms of its desire to protect the environment and comply with the objectives of the Kyoto Protocol.
Ioan Enciu
(RO) Madam President, the CETA agreement marks an extremely important step towards a fruitful future for both the European Union and Canada. I support this project and am very pleased with the progress made so far. I think that we are on the right path to concluding the negotiations this year. However, I should point out that there are two points among the several being debated which need to be resolved to avoid creating problems at the time of ratification by some Member States, if they remain unresolved. These are the oil extractions from bituminous shale, which may pose a hazard to the environment and the local communities in the area, as well as the lack of reciprocity in the case of compulsory visa requirements for Bulgarian, Romanian and Czech citizens.
João Ferreira
(PT) Madam President, this is yet another piece of the edifice which is European Union trade policy, an edifice which is growing by the day, with consequences that affect the various Member States profoundly but differently. The agreements that give concrete expression to this policy are essentially based on free trade, whose goals and effects are clearly demonstrated by the associated rhetoric: that of 'offensive interests', as if we were talking about a war. They are agreements that lack democratic legitimacy, and increasingly so as they are almost always negotiated in the greatest secrecy, behind the public's backs, seeking to cover up their economic, social and environmental impact, avoiding informed debate and clearing things up. This is the case once again.
With negotiations at a stage said to be fairly advanced and their conclusion envisaged for 2011, its impact on sectors and countries has yet to be fully debated. Its content is nothing new: the opening up of markets, and the liberalisation of services, including increasingly commercialised public services at the mercy of multinationals, making it harder for Member States to exercise their social function in these areas. The consequences are also well known: the domination of markets by a few, an impact on weaker production systems, and increasing pretexts for attacks on rights, and on working and living conditions.
Jaroslav Paška
(SK) Madam President, the European Union engages in negotiations on trade and economic agreements with all influential countries, within the bounds of its competence.
Although Canada has a strong presence in international trade, and is one of the European Union's oldest trading partners, we must proceed very sensitively and constructively as we finalise the comprehensive economic and trade agreement between the European Union and Canada. Our divergent positions on areas such as drug policy, fisheries policy and the production of oil from tar sands need to be set out in the agreement in such a way as to represent European Union policy while respecting the views of our trading partner. Reciprocity stands at the core of balanced trade and economic relations. However, the comprehensive economic and trade agreement should by no means diminish Europe's established and accepted certification parameters. I would like to believe that, as we approach the finish line, the European Commission will be up to the challenge of finding appropriate solutions to the remaining problems.
Franz Obermayr
(DE) Madam President, Canada is - I would like to say this at the outset - a wonderful country. Wonderful people, wonderful achievements - an important partner for the EU. However, we must be able to ask questions of a good partner. Many fellow Members are wrong to simply reduce this matter to sand and seals today. The tar sands represent just one example of incredible environmental destruction. Anyone who has seen Canada knows that environmental destruction is taking place there on a scale to match Brazil.
This environmental destruction also has an impact on the indigenous people, the First Nations. Their environment is being destroyed. Anyone who knows a bit about Canada, has visited British Columbia and knows how international corporations have used their influence here to make the indigenous peoples give up their ancestral areas and allow these areas to be bought up, cannot simply ignore this.
We talk a great deal about clear language and about protection of minorities in countries adjacent to the EU. However, it is also important for us to speak out with regard to the protection of the minorities that are the aboriginal peoples of Canada.
Máire Geoghegan-Quinn
Madam President, honourable Members, I would firstly like to thank all the Members who participated in this debate and Vital Moreira for putting the question to Parliament.
The Commission has taken careful note of the substance of your questions and I do hope that the answers address your possible underlying concerns.
As you know, the negotiations are making good progress. The Commission wants to ensure a balanced, ambitious, high-quality agreement and it wants to be equally ambitious on sustainable development. Canada is a highly developed, like-minded partner with strategic links going far beyond trade and investment. The EU and Canada share the ambitious negotiation objectives that can be realised to our mutual benefit, creating the potential for new opportunities.
Let me emphasise two things in particular. As regards the oil sands issues and your concerns in relation to this negotiation, for the Fuels Quality Directive to fall within the scope of CETA's regulatory cooperation provisions, both parties would need to agree. CETA's regulatory cooperation provisions would not impose any obligation to hold such discussions. Furthermore, the Commission does not propose entering into any commitment that would restrict the regulatory freedom of the EU, be it on environmental issues such as fuel quality, or on any other essential policy objective.
As I mentioned in the introduction, this agreement is hugely beneficial to our two economies and not just in material terms. In both countries, opportunities will be created for business and the manufacturing sector, thanks to the elimination of substantially all imported tariffs and improved market access for services and investors. Consumers will gain through more affordable purchases and enhanced access to high-quality services. At the same time, increased flows of foreign direct investment would act as a catalyst to creating jobs and boosting wages.
The CETA will also cover regulatory barriers such as sanitary and phytosanitary measures, customs procedures and competition rules. European intellectual property rights will gain increased protection. Reciprocal access to both sides' procurement markets would not only mean savings for public budgets but also provide huge business opportunities.
This is why the Commission is convinced that this will be a good and balanced agreement. Our very debate tonight allows for important clarifications to be made. In this context, the Commission takes careful note, welcomes the resolution to be adopted by Parliament on EU-Canada trade relations and is grateful for its general support.
My colleague, Commissioner De Gucht, will, of course, continue to keep you informed of further developments in the CETA process.
President
I have received one motion for a resolution tabled in accordance with Rule 115(5) of the Rules of Procedure.
The debate is closed.
The vote will take place on Wednesday at 12:00.
Written statements (Rule 149)
Elisabeth Köstinger
The European Union and Canada have had good, solid trade relations for many years. Canada is even one of the EU's oldest trading partners. In the mid-1970s, the EU signed the first economic and trade agreement with Canada. Further agreements followed in the livestock sector and with regard to wines and spirits. The EU-Canada comprehensive economic and trade agreement (CETA) could be very advantageous for both trading partners. However, there are still a few things that need to be taken into consideration and discussed. Clearly, the aim of the agreement must be fair competition. This can only be achieved if not only the tariff barriers but also the non-tariff and technical barriers to trade are removed. The principle of reciprocity must be respected, because that is the only way to achieve a balanced outcome of the negotiations. That also applies to elements that are specific to the country or culture of the individual partners. Discussions of tricky subjects like extraction from tar sands and the associated environmental impact, ILO standards, as well as the recognition of technical standards and the traceability of food products, must also continue on equal terms in order to reach a consensus. Of particular interest to me are the negotiations in the dairy sector and access to the Canadian market as well as origin labelling of Canadian slaughter cattle. Can the Commission provide more information in these areas? What outcome can we expect in this regard?
Maurice Ponga
I am glad that Parliament is stating its views on the current EU-Canada trade negotiations and outlining its priorities in this regard. Canada is undoubtedly a trade partner of the EU, but it is imperative that we in Parliament relay the concerns of our fellow citizens located both on European territory and in regions forming part of the European family, namely, the protection and defence of their interests. By 'European family', I mean the overseas countries and territories (OCT), which, although not strictly European territories, maintain a special relationship with the European Union, and, in particular, with the Member States of which they are part. In the trade negotiations currently under way, it is the archipelago of St Pierre and Miquelon, next door to Canada, that is particularly affected. I therefore call on the Commission, during the negotiations, to defend and protect the interests of that overseas country and territory situated in the North Atlantic Ocean.
Tokia Saïfi
Canada is one of Europe's oldest trade partners. It is only natural, therefore, that this relationship should be formalised via a comprehensive trade agreement. I do wonder, however, about the content of several negotiating chapters.
Firstly, the EU and Canada have different rules of origin systems. As Canada is a member of the North American Free Trade Agreement (NAFTA), the Commission must undertake to find a satisfactory solution regarding both industrial products and agricultural or fisheries products, so that Canada does not become a gateway through which goods from other NAFTA members enter Europe.
The Commission will also have to negotiate a solution that can be applied to two different geographical indication systems: in Canada, 'geographical indication' is a mere adjective; in Europe, it is a bona fide trademark. If European geographical indications are genuinely to be protected, the Canadian authorities will have to recognise the European concept.
Regarding the chapter on public works contracts, lastly, Canada must grant the EU the same access it granted the United States under their trade agreement; in other words, European businesses must be able to tender for contracts in the provinces, regions and certain municipalities.


Short selling and certain aspects of credit default swaps (debate)
President
The next item is the report by Mr Canfin, on behalf of the Committee on Economic and Monetary Affairs, on the proposal for a regulation on Short Selling and certain aspects of Credit Default Swaps - C7-0264/2010 -.
Pascal Canfin
Mr President, Commissioner, ladies and gentlemen, as you know, this report concerns short selling and the supervision of credit default swaps, those products that insure debt against default, in particular state default.
The origins of this text lie in the Greek crisis, which began in spring 2010. Following certain movements on the financial markets that had been observed, a political request was put to Commissioner Barnier and to the European Commission to establish European rules on short selling and on sovereign debt speculation tools. The Commission drafted that regulation in September. This was followed by the adoption of our position in the Committee on Economic and Monetary Affairs in March, and of the Council position in May. Since then we have been negotiating, because we have already had five trialogues, which have enabled us to reach a number of possible compromises. Although they are not here, I should like to thank the representatives of the Hungarian Presidency who took part in these trialogues and helped to move this matter forward.
However, after those four or five negotiating sessions, we and the shadow rapporteurs who voted by a majority for this text in the Committee on Economic and Monetary Affairs - in other words, the Group of the Progressive Alliance of Socialists and Democrats in the European Parliament, the Group of the European People's Party (Christian Democrats) and the Group of the Greens/European Free Alliance, which I represent - took the decision to vote in the July part-session for this text, but not for the legislative proposal, in order to send two messages. The first message consists in saying that we want to carry on negotiating with the Council because it has been almost a year since the Commission tabled this text and because, on this issue as on others, Parliament wishes to adopt a responsible yet ambitious attitude. We want these texts; we want the rules on financial markets to change. Too often, we have to wait for the Council, which clearly takes much longer to make its decisions than we do. Therefore, we want to carry on negotiating, which means that we will not be voting for the legislative proposal tomorrow.
However, we also want to send three messages on the substance in order to reaffirm the positions adopted in the Committee on Economic and Monetary Affairs, which will become the positions of the European Parliament too when it adopts them - by a very large majority, I think - tomorrow.
The first issue concerns the role of the European Securities and Markets Authority (ESMA). In our version we have strengthened the role of ESMA, and you have reminded us many times, Commissioner, of the importance of that institution when it comes to ensuring the consistency of the single-market rules on financial services. I have to say that the position adopted in the Council - to have a red line that is an absolute red line for us, to create a right of veto for States on European regulatory issues concerning sovereign debt - is completely unacceptable.
The second point that I wished to raise is that we in Parliament want a simple rule: when you sell an asset, be it a share or a bond, you must be able to know for certain where to find it; there must be an agreement with the person who is going to lend it to you. This is what is known as the 'hard locate' rule in technical speak. This is Parliament's position, and I think it is a sensible one.
The final point that I should like to emphasise, and which is obviously a key element of the discussions we are having, is the ban on naked credit default swaps. This position is shared by a large majority of the European Parliament. We do not see how it is possible, in financial terms, to cover oneself against a risk with a credit default swap without being liable for that risk, in other words without owning the bond of the country that issued the security. It is a nonsense and it opens the door to speculation.
To conclude, I would say that the current debates on Greece prove us right, because some of the arguments made to limit the Greek restructuring consist in saying, 'Yes, but some people have speculated. If the debt is restructured, they are going to make money without having invested in Greece.' That is exactly what we want to put a stop to.
(Applause)
Michel Barnier
Mr President, as Mr Canfin said, with each day that passes, if we look closely at what is happening on the markets, we are reminded of the urgent and topical nature of this text. That is why, Mr Canfin, my entire Directorate-General and my team have worked so quickly, I think, and so seriously in four and a half months; on 15 September it will be a year since we tabled this text. I see the time passing, we know that times passes much more quickly in the world of the markets than in the world of democracy, and that is why I hope, like you, that you will be able to follow up the good work that you have done with the Hungarian Presidency recently in order to find a solution and to reach some compromises.
Ladies and gentlemen, the 2008 financial crisis and the stock-market collapse that followed clearly illustrated the consequences and the risks that can result from uncontrolled movements on the financial markets, which are sometimes encouraged by a number of reprehensible practices that we must regulate. The 2009 bond crisis highlighted the fact that these phenomena can affect bond markets too by causing serious problems for everyone operating on them, including Member States when they try to raise capital.
In both cases, the Member States reacted urgently, and often in a disorderly fashion, without having the information and the resources necessary to act effectively and within a genuinely European framework.
The draft regulation on short selling and credit default swaps (CDS) is specifically aimed at remedying this situation. We want to make these practices more transparent. Although they are often useful, they can have an impact on the markets by increasing volatility. The regulation must enable national regulators to act effectively, within the comprehensive and coordinated European framework that we want to consolidate.
Faced with markets that are still unstable and with the persistent problems concerning the debt of certain Member States, Europe must take swift action, and it must take practical action.
It is vital that the European Parliament, the Council and the Commission can make progress on reaching a dynamic compromise, something which you yourself want, Mr Canfin, and the few weeks that you are going to have should make this possible. I am very grateful to you, Mr Canfin, for the very effective work you have done alongside and with the shadow rapporteurs, Mr Ferber, Mr Goebbels, Mr Schmidt and Mr Kamall, and the Presidency, which has supported these efforts, as you said yourself.
The text put to the vote in Parliament and the general Council agreement are aligned on many points now. I think that the trialogues have made this alignment process possible, and I hope that it will succeed.
I would just like to raise three points in your presence: the purchase of naked CDSs, the restrictions on naked short selling, and the powers of the European Securities and Markets Authority (ESMA), which you yourself mentioned, Mr Canfin.
Point one: regarding the sensitive issue of CDSs on sovereign risks and the possibility of buying them without being exposed to the underlying risk, therefore naked, I believe that appropriate action should be taken. I have reservations, as you know, about the effects of an unconditional ban on naked CDSs where the liquidity of sovereign markets is concerned and about the impact that that might have on the bond market. I think that we need to change the status quo and not leave it up to the Member States to decide whether or not to ban naked CDSs. We must not let this opportunity slip; that is why I can confirm to you that we are willing to work with the European Parliament and with the Council in order to come up with a solution that responds to these concerns, which are in fact legitimate.
Point two: regarding the restrictions on short selling and the 'locate rule', which you mentioned, we must maintain effective and sufficiently binding measures for market operators. Having different provisions for shares and sovereign debt may be an option, Mr Canfin, but this must not result in requirements that are too flexible and hence ineffective.
Point three: regarding ESMA's powers, it is very important for that authority - I shall say it again in relation to this text - to be able to carry out its coordination and, in some cases, intervention role; this was a requirement laid down in ESMA's founding regulation, which you yourselves consolidated, and this regulation officially authorises such intervention under certain circumstances. The issues relating to sovereign debt are, of course, particularly important for the Member States. We can see this very clearly at the present time, but maintaining a European regulatory framework that dovetails with an authority that can act effectively is also very important. I made a promise, during the recent ECOFIN Council in May, to work with you and with the Council on an appropriate solution.
Once again, I am very grateful to you for having properly understood and worked on this text, which I consider to be one of the bricks that we talked about earlier, and for having decided to take the few days or weeks necessary to work effectively on the trialogues and to bring them to a successful conclusion.
Klaus-Heiner Lehne
Mr President, Commissioner, ladies and gentlemen, what we have here is a very important proposal and a very important report. In my view, the very fact that we are having this debate demonstrates that in the past we allowed things to go on in the financial markets that had, in fact, been banned in casinos and state lotteries for years or even decades.
The rapporteur has rightly pointed out that, in the current situation, credit default swaps (CDSs) are being offered which insure something that may not even exist. In practice, the result - and this is also true in the current debate on the crisis in Greece - is that nobody knows how many CDSs actually exist, or what the consequences would be in the event that Greece should actually declare itself bankrupt. It is high time that we regulated this and ensured proper supervision. In so doing we can help draw up rules for the financial markets that are at least equal to those that apply when ordinary citizens visit a casino or play the lottery.
Markus Ferber
Mr President, Commissioner, ladies and gentlemen, it is right for us to debate this important proposal from the Commission here in plenary today and for us to lay down our position as the European Parliament tomorrow, because discussions in recent weeks - with all respect to the Hungarian Presidency, which has tried very hard to bring the Council and Parliament closer together on this - have shown that the Council of Ministers still needs to be motivated into adopting rules that allow what is necessary, but which prohibit what is not necessary.
Let me say quite plainly that I can hardly stand to hear the word liquidity any more. If there was one problem that was to blame for leading us into the financial crisis, it was that there was too much liquidity that was invested in products that nobody needs and which then collapsed and took us into the crisis. I ask you therefore: who is it that needs insurance against a government defaulting on its commitments? Only those that hold such government securities, and they should indeed have it. Anyone speculating on a country being unable to meet its commitments, however, should not be able to use such instruments to do so. That is why these products must be prohibited.
When it comes to the short selling of shares - in other words, selling shares that one does not have - it is a matter of drawing up rules that prevent highly speculative behaviour. I believe we have achieved a reasonable compromise here, and in this respect discussions with the Council have been very constructive. I would like to thank the rapporteur for his outstanding work. I would also like to thank the shadow rapporteurs for their constructive discussions, and also the Commission, which has played a very positive part in achieving this. Moreover, I hope that, for its part, the Council - which is unfortunately not represented here today - will be able to agree a sensible resolution of this matter with us as soon as possible. With that in mind, I am pleased that we - as Parliament - are now sending out a clear signal as regards this important dossier.
Robert Goebbels
Mr President, I fully agree with my fellow Members Mr Canfin, Mr Lehne and Mr Ferber, because I believe that in order to prevent a new financial crisis, we need to strengthen market regulation. In particular, we need to ban all abusive practices, one particularly harmful example of which is short selling. Bear Stearns and Lehman Brothers were forced into bankruptcy by the short selling of the shares of those two paragons of Wall Street capitalism. Naked credit default swaps (CDSs) are more abusive still. Warren Buffett described them as weapons of mass destruction. In theory, a CDS is a guarantee against a possible loss on a security. Yet naked CDSs offer the possibility of insuring oneself against a risk for which one is not liable. That is toxic speculation and it endangers the real economy.
Today, certain market operators are betting on the collapse of the euro area and on the default of a State. By purchasing naked CDSs on the sovereign debt of certain States, they are simply increasing the speculative pressure on the States concerned. It is strange that certain States - the United Kingdom, Italy, Spain, Romania and others - do not want naked CDSs on sovereign debt to be banned. They believe in the warnings from the markets predicting increased volatility on the sovereign debt market if naked CDSs are banned. Those governments should explain to their citizens that they prefer to give in to wild speculation rather than alienate the sacrosanct financial markets. Wolfgang Münchau, an editorial writer on the Financial Times, who is far from left-wing, writes the following:
I quote in English: 'A naked CDS purchase means that you take out insurance on bonds without actually owning them. It is a purely speculative gamble. There is not one social or economic benefit. Even hardened speculators agree on this point. Especially because naked CDSs constitute a large part of all CDS transactions, the case for banning them is about as a strong as that for banning bank robberies.
'Economically, CDSs are insurance ... A universally accepted aspect of insurance regulation is that you can only insure what you actually own. Insurance is not meant as a gamble, but an instrument to allow the buyer to reduce incalculable risks. Not even the most libertarian extremist would accept that you could take out insurance on your neighbour's house or the life of your boss.'
Therefore it is absolutely necessary that we reach an agreement with the Council, especially on banning naked CDSs.
Olle Schmidt
Mr President, Commissioner, I would like to start by thanking the rapporteur, Mr Canfin, for a splendid piece of work and, above all, for the way in which he led the trialogue negotiations. It was an absolute pleasure, even if we did not entirely agree.
We need a European legislative framework for short selling. I believe that that is something on which we all agree. We need more transparency and openness. It must no longer be possible for anything to be conducted in secrecy. We need a greater ability to regulate and we also need a greater ability to regulate at European level through the agency of the European Securities and Markets Authority (ESMA). However - and I realise that I am saying something that will not go down well in this Chamber - it is important for the financial markets to have the option of short selling. That will actually provide liquidity on the market and reveal prices that have been incorrectly set as well as any share bubbles.
The controversial question is now whether the EU should introduce a ban on short selling of naked credit default swaps. In connection with the crisis in Greece, it has been claimed that market participants have used these credit default swaps to a considerable extent to speculate against the Greek crisis. The Commission's report issued last year demonstrated that this was not the case. It simply did not happen. Neither is there any evidence, Mr Ferber, to suggest that the German ban during the financial crisis had the desired effect. On the contrary, academic experts believe that it had a negative effect. Our basic approach should be not to introduce market restrictions if we do not know what will happen.
My view and that of my group - and it is in line with what Mr Lehne and the Commissioner said - is that to experiment with a ban at the present time could be detrimental. The burden of proof should be on those who intend to introduce this ban. My group and I are in favour of the regulators being able, in exceptional circumstances, to introduce a temporary ban or to restrict short selling if manipulation of the market or other phenomena occur. However, a permanent ban at this present time would make the market, which is already experiencing uncertainty, even more uncertain.
The speaker agreed to take a blue-card question under Rule 149(8))
Sven Giegold
Mr President, I have a very short question. Could Mr Schmidt explain to me what economic benefit naked short selling brings to an efficient financial market? From my perspective, there is no theoretical reason in economic theory to explain what it is good for.
Olle Schmidt
Mr President, I would rather use my mother tongue, but OK. Mr Giegold, I tried to explain that in Swedish and I think the burden of proof is upon you to say why you should ban naked CDSs today, because exactly as the Commissioner said, there is turmoil out there in the market. We do not know what is going to happen - that is also what Mr Lehne said. This is the crucial issue now: you do not know what is going to happen, I do not know what is going to happen, therefore be cautious, my dear friend Sven Giegold, be cautious. We are not dealing with theories now. We are dealing with a dramatic economic situation in Europe today, so you have a responsibility to know what kind of proposals you are passing through this House.
Syed Kamall
on behalf of the ECR Group. - Mr President, I would like to thank the rapporteur and the shadow rapporteurs for the work that we have done, even though we may not agree on every element.
One of the things that we do agree on is the need for better coordination between regulators and supervisors across borders so that they can act quickly. We all agree on the need for greater transparency. We can also agree that, where there is abusive behaviour in short selling, that should be banned. But that is banned under the Market Abuse Directive, so we have to be clear about what we are trying to achieve with this directive.
The question has been raised about uncovered sovereign CDSs. When I talk to the participants in the market I ask them why they want to use uncovered sovereign CDSs. Some of the investment banks tell me that they need them if they provide credit lines to some small and second-tier banks. I have also heard from investors - and I have shared this with my colleagues, but they did not seem to want to listen - that, if you have investments in countries that you are concerned about and you cannot get protection on those investments, you use uncovered sovereign CDSs as a proxy hedge for those investments, in such sectors as infrastructure, shopping malls and others. That is why they are used.
The problem is that, if we ban this, what will we end up with? We will end up with more complicated and less transparent instruments, when we want transparency. We will also end up not actually recognising the real problem. The real problem with CDSs and other derivatives is how they are treated on the balance sheets of banks and how banks use them to falsify their accounts, liquidity and capital.
Let us focus on the real problem here, rather than trying to ban everything without tackling the real problem. Let us tackle the real problem of transparency, IFRS standards and the way these instruments are dealt with by banks.
Thomas Händel
Mr President, ladies and gentlemen, speculation was a major factor in triggering the crisis, while credit default swaps (CDSs) and short selling have been a major factor in heightening the crisis. These instruments have degenerated into purely speculative instruments. Some people in the financial sector seem to have incorrectly regarded or misused these instruments as a personal licence to print money. As a result, entire economies have suffered, along with nation states and, above all, the people of the countries concerned. To this extent, the fact that the Commission has finally taken the initiative and realised that regulation is necessary is to be welcomed. Whether or not the regulation will be strict remains to be seen.
I expressly welcome the work and the efforts by the rapporteur, Mr Canfin, to improve the regulation tabled and to put a stop to the gambling. What is needed is a de facto ban on naked short selling and the prevention of speculation in the future. We also need strict regulation and, above all, a strong supervisory authority in Europe.
I fear, however, that as the negotiations continue, the interests of the financial centres - London and Frankfurt in particular - will override the interests of the majority of the people of Europe. If that happens we will be left with little more than a Swiss cheese in which the holes are probably larger than what is left. That is quite definitely not something my group could support.
Dimitar Stoyanov
(BG) Mr President, to be able to control the various derivative instruments properly, you need to have people who have an excellent knowledge of them. However, ladies and gentlemen, where would anyone with such good knowledge go? To the European inspection agency where they will receive an annual salary of EUR 30-40 000, or will they become a broker on the stock exchange where they can earn millions from speculation?
This method of getting rich by using speculation and knowledge about how the system works has been known for two thousand years, ladies and gentlemen, as oligarchy. As a result of the games being played by the new financial oligarchy, Europe's citizens, the very ordinary, poorest people, are now paying the price due to the fact that this oligarchy was left to its fun and games. This is why, in order to stop this act of robbery against European citizens, Commissioner, it is not just necessary but compulsory to ban uncovered short selling and credit swaps.
(The speaker agreed to take a blue-card question under Rule 149(8))
Franz Obermayr
(DE) Mr President, my question is addressed to the previous speaker. Yes, we should come to an agreement with the Council. That is all very laudable. I should be interested to hear how the previous speaker sees the situation. In his view, is the Council dragging its feet and not sufficiently prepared to be transparent? In particular, I should be interested to know what role the national governments should play - an important role or a fairly insignificant one? Moreover, what is his assessment of the function and task of the European Securities and Markets Authority (ESMA)?
Dimitar Stoyanov
(BG) Mr President, thank you, Mr Obermayr. I think that the answer to your question is very simple. When we see the Council dragging its feet and doing nothing for more than a year, I cannot understand the Commission's position. Why should Member States be banned from taking measures themselves? When one State is under threat, it cannot expect the Council made up of all the States to be on hand to make a decision, assuming that it does not want to. This is why I think that Member States must be given the power to ban these instruments in this situation.
As far as the role of the European Securities and Markets Authority (ESMA) is concerned, I agree that it is exceptionally important. However, as I said at the start of my speech, I cannot simply imagine how staff, who should exercise real control, will be recruited for this agency.
Sławomir Witold Nitras
(PL) Mr President, I would like to congratulate the rapporteur and the shadow rapporteurs. Let me make a few comments based on the debate.
Some of you may think this is trivial, but I would like to remind you that falls on the stock markets during the crisis were a consequence and not a cause of the problems. The reasons for these dramatic falls were the excessive risks taken by market participants, and the falls were a reaction to the losses they incurred. Sometimes, after all, prices have to fall to reflect the true value of a share or bond or other instrument. What is important is that these falls do not lead to panic or excessive hesitation. This is why the regulation is so important. In my view it addresses the challenge, and this is why I am pleased, as a situation where a supervisory agency is in possession of the full facts on short selling is an eminently desirable situation. It will increase the quality of supervision and confidence in this type of institution. However, I am not fully convinced whether making this information public will also contribute to this. I hope that it does not have consequences which are very different from those expected, such as the knowledge that a certain amount of short selling is taking place which may lead investors to tend to pursue that very trend.
Regarding credit default swaps (CDSs), I am not convinced that banning uncovered CDS transactions is a proper reaction to what has happened to Greek bonds. There is no convincing proof, or at least I am not aware of any, that CDSs caused greater hesitation or increased interest rates on bonds of endangered countries. Please remember that the markets for CDS contracts are many times smaller than the bond markets of countries on which they are based. This is why it is difficult to believe that this issue has had such an effect. Even in spite of that I could agree that the ban is justified, were it not for the fact that - as Mr Kamall mentioned, among others - empty CDSs in fact cover other transactions which have not been included.
Wolf Klinz
(DE) Mr President, ladies and gentlemen, we do not know precisely what role short selling or naked short selling played in the bankruptcies of Merrill Lynch and Lehman Brothers, but we do know that they made at least a substantial contribution to the collapse of these institutions.
Claiming that naked short selling is useful for the market is as hard to prove as saying that it will be the end of the world if we do not prohibit it. We are dealing here with a highly complex, extremely technical area and I would not dare to claim that one thing or another was definitely right. However, it seems to me absurd to want to sell something that you do not even have, and moreover to want to do this on a speculative basis. It goes against my basic understanding of how one should behave in business. If I do not have the title to something then it is difficult for me to offer it for sale. Whether this is genuinely useful for the market is something that I am not in a position to judge. Perhaps it is - but my instinct suggests it is not.
I would therefore suggest that we should deal with it by saying that shares, debt instruments and credit default swaps (CDSs) can only be offered for sale if you either hold the title or - if you do not hold the title - a loan agreement has been concluded or at least an agreement that says that the title will be available the next day or in a certain number of days' time if the transaction is actually concluded and settled, so that no risk arises. I thought that the Council and Parliament had already agreed on this when they agreed the intraday rule. I regret to say that the Council has since moved away from this position, and I hope that it may find its way back to it.
One thing is certain: in the final event, these are international transactions and it is therefore important for us to have very clear supervisory rules. It seems to me that the recently established European Securities and Markets Authority (ESMA) is the ideal institution to have a sole mandate to intervene in serious cases and to establish what needs to be prohibited, what needs at least to be recorded, where we need a repository, where we need a reporting requirement and so on. In this respect we have an ideal opportunity to use ESMA productively.
Elena Băsescu
(RO) Mr President, I too must welcome the Commission's initiative on creating a legal framework for short selling and credit default swaps (CDSs) regarding the situations where market operations would pose a threat to financial stability or market confidence. I agree with the proposal to introduce a transparency system which entails the relevant authorities being notified of significant net short positions in shares, according to specific thresholds. In normal circumstances, short selling is conducive to market liquidity and helps set prices effectively. However, when the markets are experiencing difficulties, this operation can exacerbate the fall in prices. This situation would result in turbulent markets and systemic risks.
Regulatory bodies must be given clear-cut powers to restrict or ban short selling in exceptional circumstances. They will be exercised in cooperation with the European Securities and Markets Authority (ESMA).
Monika Flašíková Beňová
(SK) Mr President, much like today's debate on derivatives, this debate on short selling and credit default swaps is important if we are to maintain already fragile financial stability. The fact that these provisions take the form of a regulation is unavoidable, as they impose direct obligations on private parties to disclose information. Transparency is particularly important for financial market stability and investor protection.
Another significant point in this proposal is the suggested ban on naked short selling. The current debt crisis has shown how speculators who choose to gamble on the bonds of eurozone Member States rather than actually own them are capable of bringing entire countries to their knees, so it is vital to restrict the practice of using credit defaults swaps as cover for securities solely to the bond holders.
The final important point promoted by the text before us is the strengthening of ESMA's powers. I hope that the Council will review its position that decision-making in exceptional situations should be placed in the hands of finance ministers rather than ESMA, and that ESMA will take precedence in this regard.
Franz Obermayr
(DE) Mr President, I am glad to have the opportunity to add a few critical remarks. In short selling one is selling a security that one does not have, or that one has merely borrowed. This enables speculators to bet on falling prices. These complex, opaque instruments were the deciding factor in bringing about the financial crisis. We therefore need a basic ban on speculative short selling of forward contracts. However, this ban needs to be comprehensive and must also include naked credit default swaps (CDSs) and short selling, particularly of government bonds. Betting on states being unable to meet their commitments in times of crisis is abominable, and we need to stem the tide of destructive speculation involving government bonds. Finally, we also need to bolster our mechanisms for sanctions in the financial services sector. The crisis involving the euro should have shown us one thing at least: not every financial transaction that is profitable in the short term is economically and ethically justifiable.
Jean-Paul Gauzès
(FR) Mr President, having listened to this debate as a layman, I think that we need to show some common sense in this affair. When crises occur, the citizens are the ones who directly or indirectly pay the consequences. I believe that when they realise the absurdity of selling something that one does not own, or of insuring against a risk for which one is not liable, they understand that this is an inappropriate system.
I believe that we should try today to apply some common sense to this complex financial legislation, so that the human spirit is back at the heart of this work, instead of computer programs that are all configured in the same way to ensure that, when ridiculous transactions take place, no one really understands what is going on. I believe that Parliament has adopted some reasonable positions, and I hope that the Council will support them.
Evelyn Regner
(DE) Mr President, Commissioner Barnier, in your introduction you said how important it is to make dynamic progress on this matter. That is a view I share, but at the same time I cannot help but remember that we Members already include a passage aimed at prohibiting naked short selling in the dossier on alternative investment fund managers. It did not have the intended effect. A separate proposal was tabled.
I originally drafted the opinion of the Committee on Legal Affairs on this matter, but I subsequently had my name removed because, in my view, we should not be making compromises here. We need a rigorous ban on naked short selling. Credit default swaps for government bonds should be prohibited. In this regard I can only congratulate the Committee on Economic and Monetary Affairs, which was able to achieve something constructive in the later work, for having succeeded to some extent and hope that in the end the Member States will be a bit more reasonable.
Michel Barnier
Mr President, Mrs Regner, I have not forgotten the promise that was made during the debate - which Mr Gauzès and all of you here remember - on the Directive on Alternative Investment Fund Managers.
It is precisely for that reason that, as I said earlier in response to the work done by Mr Canfin - which many of you unanimously praised, and rightly so - the Commission honoured its commitment by preparing, in the space of four and a half months, the text that it presented almost a year ago - it will be a year to the day on 15 September - to the bodies in charge of making a decision: Parliament, which you represent and comprise, and the Council.
I should like to thank Mr Lehne, Mr Schmidt, Mr Händel and Mrs Flašíková Beňová for agreeing that we need to regulate credit default swaps (CDSs) and to increase transparency and financial stability. Mr Gauzès spoke about the citizens. The citizens are also taxpayers. As I have often said, they cannot afford a second crisis and, politically speaking, they will not accept another crisis without lessons being learnt from the current one, which has been going on now for more than three years and is still not over. We owe it to the citizens, particularly to those who live in countries that are being attacked on the markets, Mr Gauzès, and which are suffering under the effects of volatility, speculation and hyper-speculation, which Mr Stoyanov was not the only one to denounce here.
That is why the Commission has proposed rules, transparency and accountability, but needless to say it is willing to carry on and accomplish even more work with Parliament.
Mr Ferber, to whom I listened, as always, very carefully, raised the issue of liquidity. Let me say it again: I want to be cautious and realistic with you. Mr Schmidt also raised this point, as did Mrs Bǎsescu. We know what an important role liquidity plays in ensuring the smooth functioning of the debt market. That is why I expressed reservations about a straightforward ban. However, I am always willing to discuss progress of any kind, and any additional rules that could provide peace of mind, Mr Ferber.
Mr Goebbels was right in saying that short selling can be harmful. However, it can also be useful, which is why we did not hesitate to implement a framework and rules. I agree with you, Mr Goebbels, holding CDSs without being exposed to the underlying risks does present problems, and sensitive ones at that. Mr Kamall also mentioned the sensitive nature of this issue. This is one of the issues that we will have to address in the trialogue.
All in all, though, ladies and gentlemen, thanks to you and with you, we are going to create for the first time, if you and the Council so wish, a European framework on the CDS market, with a European authority which I hope will not be undermined, on this or any other issue, and I am keen for it to be able to use ESMA's Article 9 - which Mr Giegold knows well - which gives it important powers.
A word about naked short selling, which concerns me just as much as it concerns you. Mr Klinz and Mrs Regner raised this point. In this text we are going to propose - and I hope we can see it through - two types of regulation, everyday regulation in the shape of the 'locate rule', which your rapporteur, Mr Canfin, mentioned, and then a coherent liability system with a buy-back obligation. We will therefore have binding everyday rules for everyone and then the ability to enforce a coordinated ban, which we all wanted, in the event of an emergency.
One final word, Mr Nitras, on the disclosure of information. We have made provision to disclose information on shares above a certain threshold. Moreover, if I am not mistaken, that is precisely what the regulators wanted and requested. In the case of sovereign debt, this disclosure will not be automatic, but it will be compulsory to provide information to those regulators who need it.
That is what I am able to say, Mr President, by way of thanks to the rapporteur and to the speakers, and to clarify a number of points before you - we - spend the next few weeks, I hope, reaching a dynamic agreement on this point.
Pascal Canfin
Mr President, I just wanted to say something to my fellow Member, Mr Kamall - since he is one of the negotiators of this text and is very familiar with it, and if he is not, he only has to read it - concerning his argument that credit default swaps (CDSs) are used as proxy hedges and therefore should not be banned. As the text says, when CDSs are used for proxy hedging, they are not uncovered. It would be helpful, therefore, if you could change your argument or read the text, because we are debating for nothing otherwise.
(Applause)
The second point that I wished to make is that we really want to complete this text because we feel that the situation is urgent. No one is saying that CDSs caused the Greek crisis. It would be absurd to think that. However, they are clearly being used to fan the flames by financial operators whose sole aim is to exacerbate the crisis so that they can make money at some point.
While we are on the subject of CDSs, I should like to tell you that this text only covers the purchase of these swaps. This presents another problem, which was also raised by Mr Kamall, concerning the fact that operators who sell CDSs, such as US banks and hedge funds, are supposed to provide a guarantee against the risk of default to banks such as BNP, Deutsche Bank and Barclays. For those banks, it is a way of getting the risk off their balance sheets. However, those who sell CDSs, such as hedge funds, have a lot less capital than the banks. This tool has the effect of reducing capital requirements and hence the security of the system.
Since you are working on the Capital Requirements Directive 4, I should like it if you could also cover the sale of CDSs and the obligations incumbent on sellers of CDSs, rather than just focusing on buyers, as is the case in this text.
President
The debate is closed.
The vote will take place on Tuesday, 5 July 2011.
Written statements (Rule 149)
Sebastian Valentin Bodu
Unlike long selling, where the risk is reduced to the difference in price between buying and reselling, the risk with short selling is unlimited, which means, in theory, that losses could be limitless. Taking into account the unlimited risks which a seller also assumes in short selling, it was considered necessary to adopt this regulation. However, certain notification periods or procedures may have slightly more relaxed deadlines. Furthermore, speculative transactions, along with hedging transactions, are an integral part of this market and must be declared to the European Securities and Markets Authority (ESMA). Speculative transactions are not damaging in themselves; the danger lies in them getting out of control.
Edward Scicluna
in writing. - Restrictions on short selling and credit default swaps in exceptional situations have long been overdue, as is the need for more transparency from financial markets. Parliament rightly found it appropriate to have a common framework rather than to rely on a number of divergent measures by Member States, as experienced during the financial crisis three years ago. These obligations come in the wake of various other reforms to past regulatory regimes. It is easy to jump on the bandwagon at this time and argue that more regulation is better because we do not want to live through another crisis in our lifetime. But at the same time we all want to look forward to a future where industry, both manufacturing and services, provides much-needed jobs, based on strong economic growth. For this we need many bankable projects. Let us therefore satisfy ourselves that there is no unintended collateral damage to industry from financial regulation. We do not want EU project funding to be curtailed by a drought of liquidity, nor do we want their responsibility in mitigating risks to become prohibitively expensive so as to make them lose their competitiveness.