Comprehensive Economic and Trade Agreement
The Comprehensive Economic and Trade Agreement (CETA) was fifteen years in the making. The journey formally began December 2002 when the European Union (EU) and Canada signed a joint statement committing to shape a “forward-looking, wide-ranging bi-lateral trade and investment enhancement agreement.†(OAS) A framework for a Trade and Investment Enhancement Agreement (TIEA) was agreed to in March 2004. The TIEA was aimed at building upon prior cooperation efforts between Canada and the EU where it was proved successful as well as pursuing future areas for bilateral trade and investments. In December 2004, the European Commission and Canadian government executed an interesting pre-negotiation regulatory cooperation framework. This agreement set forth objectives around regulatory governance, good practices to create better regulations, facilitating trade and investment, and promoting competitiveness and enhancing the climate for innovation. The first round of TIEA negotiations took place in Brussels May 2005, however, negotiations were suspended in 2006.
When negotiations resumed in 2009, the scope and objectives were expanded beyond the TIEA and the new agreement mandate was named the Comprehensive Economic and Trade Agreement. According to the European Commission’s Sustainability Impact Assessment (SIA) there were key issues that were needed to be addressed through the negotiations. Specifically, more concretely defining the rules of origin; determining the provisions related to emergency action and trade remedies; deciding on the usage and timing of tariff phase-outs; and the design of mechanisms to address sanitary and phytosanitary and technical barriers to trade. This was all part of a joint EU-Canada scoping exercise to determine what areas would, in fact, be tackled in this transatlantic free trade agreement. Both parties agreed to an ambitious trade and investment agenda.
After nine negotiation rounds, the EU and Canada announced the conclusion of negotiations in October 2013 and finalized the text in August 2014 to be received by the EU Member States and Canadian provinces and territories. The CETA text incorporates the main elements of the EU’s approach to investment that was present in the Transatlantic Trade and Investment Partnership (T-TIP). T-TIP was an ambitious, comprehensive, and high-standard trade and investment agreement between the EU and the United States that was being negotiated during the Obama Administration. The first T-TIP negotiations were held July 2013. During this negotiation round intellectual property rights, textiles, rules of origin, market access, and customs and trade facilitation were tackled in working groups. There were a total of fifteen T-TIP negotiation rounds, that last of which was held October 2016. The goal of T-TIP was to connect two of the most modern, most developed, and most committed to high standards of consumer protection in the world, further strengthening the economic partnership. It was set on a course to be a cutting-edge agreement, providing greater compatibility and transparency in trade and investment regulation, while maintaining high levels of health, safety, and environmental protection, according to the then United States Trade Representative. Unfortunately, T-TIP negotiations ended without conclusion at the end of 2016 and was not advanced by the Trump Administration. The Council of the European Union issued a Council Decision April 2019 declaring the negotiation directives for T-TIP obsolete.
The CETA was entered into provisional application on September 21, 2017. This action was preceded by its approval of EU Member States expressed in the Council and by the European Parliament, which concluded the ratification process at the EU level. The CETA will fully and definitively enter into force when all EU Member States have ratified the agreement; however, many parts have been provisionally applied since September 2017. The unanimous approval by more than 30 European national parliaments and assemblies of Belgium’s regions is a daunting task given there are a few contentious provisions in the CETA as approved by the Union. This process will take many years. Civil society groups in the EU are concerned that environmental, consumer, and labor standards will be compromised by the provisions of CETA. The most concerning part of CETA is the provision for settling disputes between international companies and national governments. If adopted, “in practice it is a mechanism for multinational companies to sue a state for damages if a government introduces new laws or policies that the company thinks will reduce its future profits.†(Coghlan) Many believe this provision places too much power in the hands of large corporations, away from the people. Due to the changes necessary to mitigate global warming, environmentalists are deeply concerned. The Green Party has an official position against the Agreement. “Moreover, the worry is the existence of this investor court system will have a ‘chilling effect’ on governments who won’t even try to take the actions…need[ed] to drastically reduce climate pollution for fear of being sued.†(Coghlan) (Side note: Since the United Kingdom(UK) is no longer a Member State of the EU, the Canada-UK trade relationship is no longer governed by CETA.)
CETA consists of thirty chapters; however, it is beneficial to consider the agreement through the lens of its seven main parts. Those major parts are: 1) Trade in Goods; 2) Trade in Services; 3) Public Procurement; 4) Investment; 5) Intellectual Property; 6) Sustainable Development; and 7) Smaller Companies. I will discuss each part from the perspective of the EU.
Trade in Goods – The EU has been a major exporter to Canada of machinery, chemicals, and food and drink products. CETA abolished 98% of Canadian duties on EU goods from day one. This is sure to be a boost to existing and new EU exporters, resulting in their goods becoming more competitive in the Canadian market. The Agreement is estimated to save EU companies €590 million in Canadian customs duties each year over time. (CETA Overview Factsheet) It more than doubles the Canadian quota for imports of EU cheese. Sensitive EU food products are protected, such as beef and pork with limited tariff-rate quotas. A further protection is the Agreement does not open the EU market to poultry and eggs.
Trade in Services – The Agreement opens up the Canadian market in the financial services, postal and courier, telecommunications, and transport industries. I found it interesting that the CETA provides a framework for the EU and Canada to recognize each other’s qualifications in regulated professions such as accountants, architects, engineers, and lawyers. As I recall, certifications and professional standards are an area still being refined by EU’s Member States under the free movement of services.
Public Procurement – The CETA guarantees the EU access to Canada’s large public procurement market. This is significant because it allows EU companies to bid for provincial and municipal contracts.
Investment – This area is straightforward in that the Agreement promotes increased investment between the EU and Canada, in both directions.
Intellectual Property – This is an area high on the list of protections by both developed economies. Protecting intellectual property owned by EU individuals and companies is touted to be improved through the provisions of the Agreement.
Sustainable Development – The environment and fair labor practices are high-profile issues interwoven in trade. Thus, in the CETA’s forward-looking approach, it only seemed right to include provisions advancing environmental protections and a respect for fair labor practices. The Agreement contains strong legally binding commitments in this area.
Smaller Companies – Support for small and medium sized enterprises (SMEs) is important to most developed nations in the 21st century. The CETA enhances SME growth through reduced trade barriers, tariff elimination, simplified customs procedures, and more compatible technical requirements.
As of mid-2020, some 14 EU Member States have ratified CETA. However, in August 2020 the Parliament of Cyprus refused to ratify the Agreement which presents a slight setback for CETA. Cyprus has major consternation related to the lack of protections for its agricultural products, particularly its Halloumi cheese. Cyprus will be working to pursue an exemption for its sensitive products. Since CETA is a mixed agreement, meaning it is subject to the two-tiered ratification process, the approval process is a lengthy and potentially frustrating process to get across the “start line.â€
References:
Organization of American States (OAS) website. Trade Policy Developments: Canada-European Union – SICE, Foreign Trade Information System available at: http://www.sice.oas.org/tpd/can_eu/can_eu_e.asp
Regional and Bilateral Initiatives, Governments of Canada-European Commission. Framework on Regulatory Co-operation and Transparency. (September 2006) available at: http://www.sice.oas.org/tpd/can_eu/Negotiations/Regframework_e.pdf
European Commission. A Trade Sustainability Impact Assessment (SIA) Related to the Negotiation of a Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada, Final Inception Report. Trade 10/B3/B06 (October 2010) Available at: https://trade.ec.europa.eu/doclib/docs/2010/december/tradoc_147081.pdf
European Commission website. CETA Chapter by Chapter. Available at: https://ec.europa.eu/trade/policy/in-focus/ceta/ceta-chapter-by-chapter/
CETA Overview Factsheet: The 7 Main Parts of the Agreement extracted from: https://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156056.pdf
Coghlan, Oisin. “Q&A What is the CETA Deal?†Irish Examiner. (December 16, 2020) extracted from: https://www.irishexaminer.com/opinion/commentanalysis/arid-40191654.html