Canada and the EU achieved the final stages of this agreement on 29 February 2016 when they announced the end of the legal review stage of the text. The legally reviewed agreement will now be submitted to EU Council and the European Parliament for approval.
The objective of CETA (Comprehensive Economic and Trade Agreement) is to increase bilateral trade and investment flows between Canada and the EU.
Below is a summary of the main areas of the agreement
The agreement covers 13 main sections (or chapters):
1. Duties, Taxes and Tariffs in relation to trade of Goods
2. Other Key Elements of Trading of Goods
3. RoO – Rules of Origin
4. TBT – Technical Barriers to Trade
5. SPS – Sanitary and Phytosanitary Rules
6. Customs and Trade Facilitation
7. Services and Investment
8. Investment Protection and Investment Dispute Resolution
9. Government Procurement
10. IPR – Intellectual Property Rights
11. Geographical Indications
12. Trade and Sustainable Development
13. Other Areas
1. Duties, Taxes and Tariffs in relation to trade in Goods
The implementation of CETA will result in the rapid removal of duties. Most will be eliminated when the agreement is implemented. The objective is to have any remainder duties on industrial products eliminated within seven years from the commencement of the agreement.
CETA is expected to save EU exporters of industrial products into Canada around €470 million per annum. For Canadian exporters it is expected to be €158 million per annum.
However the biggest sectors to benefit from the elimination of duties because of CETA will be Agriculture and Food sectors. In this sector, it is estimated that over 90% of products will become duty free.
CETA has been designed to provide consumers with more choice and better value in relation to food.
The areas where the CETA elimination of duties and taxes will have the biggest impact will be in Wines & Spirits and Processed Agricultural Products (PAP’s). The EU expects to new market opportunities in these areas from CETA.
However there will be restrictions in some areas such as dairy, beef, pork, sweet corn and common wheat. Under CETA current restrictions on poultry and eggs will still remain. However Canada will eliminate these duties and the quotas on dairy when the EU eliminates its quotas on imports of Canadian common wheat. The EU entry-price system will be maintained.
CETA will also open up the trade in fish. There will be elimination on duties imposed on Canadian fish for EU importers and processors. There is also a focus on developing sustainability within the fishing sector. Canada and the EU have also agreed to work together to prevent illegal fishing.
2. Other Key Elements of Trading in Goods
Under CETA government imposed export duties and restrictions on products exported will not be allowed. This may assist Canada to become a main energy provider to the EU.
Government provision of subsidies to exporters of products between both areas will become prohibited. However governments are still allowed to subsidise producers of products for sale within their domestic markets.
3. RoO – Rules of Origin
The EU and Canada have agreed a process to assist in the definition of what is “Made in Canada”, “Made in the EU” and what is made by a third country. CETA has also made provisions for TTIP and how it might affect the definition of Canadian products.
4. TBT – Technical Barriers to Trade
Companies are going to find major cost reduction here as they will no longer have to get products tested in both areas for approval prior to sale. This means a conformity assessment body in the EU can test EU products for export to the Canadian market according to Canadian rules and vice versa.
CETA envisages closer relations between the EU and Canada in the area of product regulations e.g. EN and CAS. Both sides have agreed to recognise a conformity assessment from the reciprocal body. Areas covered includes electrical, electronic and radio equipment, toys, machinery, and measuring equipment.
5. SPS – Sanitary and Phytosanitary Rules
CETA will rationalize authorization procedures, reduce expenses and improve the predictability of trade in animals and plant products.
CETA has integrated all existing Canada-EU Veterinary agreements in relation to meat and meat products. It has established new processes which will facilitate the approve procedures of plants, fruit and vegetables.
6. Customs and Trade Facilitation
Under CETA, importers and exporters are expected to experience cost reductions in customs processing as the EU and Canada have undertaken to apply simplified, modern and where possible automated procedures for the efficient and expeditious release of goods.
7. Services and Investment
Under CETA there is a framework for a process of mutual recognition and acceptance for professionals who are qualified in regulated professions in Canada and the EU.
CETA allows European service providers to access the Canadian markets and vice versa, these services include telecommunications, maritime transport, energy and financial services. It is estimated that the EU are expected to gain in outputs by as much as €5.8 billion per annum.
CETA also facilitates in the freeing up of movement of service providers and key personnel between Canada and the EU. It also envisages an easing of access to personal consultancy services in sectors such as architecture, accountancy and engineering.
8 Investment Protection and Investment Dispute Resolution
CETA removes and eases barriers for investors to enter the Canadian or European market. Moreover, the agreement ensures that all investors are treated equally and fairly and does not enforce any new limits on foreign shareholding.
CETA includes an investment protection and dispute settlement system which matches the expectations of the EU’s and Canada’s citizens and business. This ensures that all investors are treated equally and fairly through a new system which is more transparent, speedier and institutionalised.
From a European perspective CETA covers the EUs investment protection and investment dispute processes, including:
- Strong language confirming the right to regulate for all levels of government.
- A permanent and institutionalised dispute settlement tribunal. The members of the tribunal will no longer be designated ad hoc by the investor and the state involved in a specific dispute but in advance, by the authorities of the EU and Canada. The appointments will be based on high qualifications and proven ethical conduct. The three members of the tribunal dealing with a given dispute will be allocated at random, to guarantee their impartiality.
- Detailed commitments on ethics to avoid any conflicts of interest, whether perceived or real.
- An appeal system comparable to what is found in domestic legal systems, meaning that decisions will be checked for legal correctness and reversed where an error arises.
- A commitment by the EU and Canada to work with other trading partners to set up a permanent multilateral investment court with a standing appellate mechanism.
9. Government Procurement
Both Canadian and European businesses will now be able to tender for all levels of government public contracts across Europe and Canada. The reason that all levels are mentioned is that CETA includes provincial authorities who responsible for a large public spending.
Under CETA rules, Canada must now launch a single electronic procurement website, which is similar to the EU version. This website will provide information on all tenders so as to now allow EU companies can effectively take advantage of these new opportunities. Canadian companies can now search for and bid on EU government tenders using the EU’s own procurement website.
The EU estimates that CETA will allow EU businesses to compete for an annual €94 billion worth of Canadian government tenders. The Canadian government expects a higher number in relation to EU government tenders available for Canadian business to bid on.
10. IPR – Intellectual Property Rights
CETA creates a unified approach of understanding between the EU and Canada in relation to intellectual property rights. There is an agreement for closer co-operation between both sides against counterfeited trademarks, pirated copyright goods and counterfeit geographical indication goods.
This chapter of the CETA agreement also has strong focus on pharmaceuticals and protections and processes for appeals of decisions.
11. Geographical Indications
Food Producers and Farmers from specific geographical regions will now benefit from the added protection of CETA. This will recognise that only foods produced from certain regions may carry the geographical indications (GIs) of that region
The use of geographical indications (GIs) including European GIS such as Grana Padano, Roquefort, Elia Kalamatas Olives or Aceto balsamico di Modena will be reserved in Canada to products imported from European regions where they traditionally come from. CETA also allows for other products’ names to be added in the future.
CETA allows GI products to trade under their traditional GI names in the other area. So, for example, Prosciutto di Parma will finally be allowed to use its real name when being sold in Canada.
12. Trade and Sustainable Development
Under CETA a common sustainable development framework which has a set of rules for labour and environment related aspects has been agreed.
13. Other Areas
Under CETA there are also agreements in other areas including the behaviour of SOEs (State Owned Enterprises), manufacturing processes on pharmaceuticals products, Trade Defence as well as state-to-state Dispute Settlement.
There is also agreement that the EU and Canada will work towards regulatory convergence in relation to Car Standards. This may also tie in with the TTIP negotiations currently taking place between the EU and the USA. (Keep reading my posts for updates on TTIP).
There is an agreement by both sides to commit to the UNESCO convention on the protection and promotion of the diversity of cultural expressions.
CETA does not affect EU rules on the use of growth hormones or GMO’s in beef. Canadian products can only be imported and sold in the EU if they fully respect the relevant European regulations – without any exemption.
Conclusion
CETA will certain bring major benefits to businesses of all sizes across Canada and Europe.
Combined with a TTIP agreement a massive trading area between North America and Europe will come into existence. There may be geopolitical implications with each of the participants possibly redirecting their focus from Global Trade to Cross Trade. After all what are the chances of conflict between a North American country and a European country.