Canada: Canada-EU Trade Negotiations – Racing To The Finish Line

Last Updated: July 8 2011
Article by Peter E. Kirby

World Trade Executive: North American Free Trade & Investment Report, Vol. 21, No.11

In May 2009, Canada and the European Union ("EU") began negotiating an ambitious and wide ranging Comprehensive Economic & Trade Agreement ("CETA") and those negotiations are on track for conclusion by the end of this year.

The proposed agreement would have a major impact on the Canadian economy, and would begin the process of lessening of what many see as Canada's excessive and strategically risky dependence on trade with the United States. With a GDP of $19 trillion in 2009, the 27 Member States of the EU make up the world's largest single market and enhanced access to even a fraction of that market could bring enormous economic benefits for Canadian exporters. The negotiators will shortly exchange offers – a critical step in the negotiations - and then focus on the remaining unresolved issues. Here is a summary of some of the issues to watch.

Market Access for Non-Agricultural Goods

Tariffs on most products traded between the EU and Canada are relatively low or non-existent but, in a few particularly sensitive areas, tariff rates remain high and the negotiators will be looking for major concessions in those areas. The limited high tariff sectors include shipbuilding, textiles and automobile and both Canadian and European negotiators are looking to move to a zero tariff across the board when the agreement comes into force; i.e. there would be no phase-in.

Apart from the few instances of high tariffs, the most important trade in goods issue will be the rules of origin or how goods will qualify as Canadian or European.

Under NAFTA's influence, industrial production has rationalized on a North American basis and Canada no longer has the manufacturing depth to support origin rules that require a majority of Canadian content. Canada needs rules of origin that will permit a significant amount of non-Canadian content but the EU does not want Canada to serve as a back door to the EU market for U.S. or Mexican goods. Traditionally, the EU has required 60% domestic content to confer origin and Canada does not have the manufacturing depth to be able to produce manufactured goods with 60% Canadian content. The Canadian government admitted as much in the 2010 budget when it unilaterally eliminated all tariff on imports of manufacturing inputs. It made that concession to allow Canadian producers to have duty-free access to inputs that were not produced in Canada.

Without origin rules that are significantly more lenient than is usual, zero tariffs will be simply irrelevant for Canadian manufacturers, and that would be major blow for Canada's automobile industry.

Market Access for Agricultural Goods

Talks on market access in the agriculture and agrifood sectors are proving tough. Farmers everywhere have serious political clout and both the EU and Canada aggressively protect their farmers with a wide range of protectionist measures.

The EU protects its farmers with high tariffs, regulatory barriers and massive subsidization. Canada does it through supply management and tariff rate quotas which exclude all but a small amount of imports in supply managed commodities. Canada also maintains a monopoly in wheat and other grains through the Canadian Wheat Board.

Canada's negotiating strategy is complicated by the differing goals of the Provinces and regions. Ontario and Quebec's main objective is to protect supply management and that means excluding European cheese and butter. The Western provinces are pushing for greater access to European markets for Western beef, pork and wheat and are much less concerned about imports.

Getting the right rules of origin is also important for Canada. Given the reality of cross-border livestock movement in Western Canada and the degree of integration between the Canadian and U.S. producers, the definition of what constitutes a Canadian product will need to be flexible. However, the EU does not want the CETA to be a backdoor to the European market for U.S. farmers and will be looking for strict rules of origin.

Finally, the EU is pushing hard for recognition of geographical indicators (GIs) for many agrifood products. Recognition of GIs would prohibit Canadian producers from using certain names (or even derivations or variations of those names) on Canadian products. In the recent EU‑Korea FTA, Korea agreed to recognize a wide range of EU GIs including: Roquefort, Camembert de Normandie, Brie de Meaux, Emmental de Savoie, Jambon de Bayonne, Mortadella Bologna, Prosciutto de Parma and Gorgonzola.

While recognition of the GIs themselves is unlikely to pose a problem, the EU policy is that the use of derivatives or variations of the GI are also prohibited. Recognition of its GIs has been a major policy goal of the EU for a long period and it is unlikely that the EU will sign any agreement that does not provide protection of its GIs and many Canadian producers will be surprised to realize the impact of that, for example, in 2005, the European Court of Justice that only cheese originating in Greece could be called "feta".

Trade in Services

Liberalizing trade in services is, in many respects, more difficult to negotiate than liberalizing trade in goods but carries enormous economic potential for the Canadian economy. Traditionally, service negotiations have focused on specific service sectors such as financial, insurance, telecommunications and the four modes of delivery of those services, with concessions being made on a "per sector/per mode" basis. The CETA negotiation appears to be going well beyond those traditional approaches.

For the first time ever in trade negotiations, the EU has agreed to adopt a "negative list" approach to service coverage, whereby all services and all modes of delivery are included unless specifically excluded. That has been such a radical departure for the EU, it has stalled the offer process as the Member States take their time to make sure that everything they want excluded is listed. In return, the EU has asked for major service concessions from provincial and municipal governments (who have traditionally offered little or nothing) in sectors such as water treatment, transport, education and health care. If provinces and municipalities offer concessions in those sectors, it will be a first for Canada and will provide significant opportunities to EU companies.1

Government Procurement

The single most important goal for the EU in these negotiations is to get access to Canada's government procurement market, at the federal, provincial and municipal levels. The EU insisted that the provincial governments be included in the negotiations as a pre-condition for the start of talks. The EU wants to eliminate discriminatory procurement practices by provincial governments that favour local suppliers, like Montreal's decision to award a subway railcar contract to Bombardier without tender or Ontario's preferences for local products in its Green Energy Act.

Canadian provinces (and some municipalities) have shown their willingness to give up discriminatory practices temporarily by signing the 2010 Canada – U.S. Agreement on Government Procurement and its seems a safe bet that Canadian provinces, territories and municipalities will make significant concessions on procurement in the CETA because without such concessions there will be no agreement. What remains to be seen is the extent to which the EU will provide access to its own sub-national procurement markets to Canadian exporters.

Non-Tariff Barriers

In many cases, it is not high tariffs that are keeping Canadian goods out of the European market but complicated regulatory standards that vary both in content and application, form one country to another. Thus, a Canadian exporter may face twenty-seven different sets of requirements – one for each country in the Union. The issue of technical barriers to trade and, in particular, the lack of uniformity, clarity and transparency in regulatory standards is a major issue for Canadian negotiators.

All governments regulate to promote policy goals in areas such as health, safety, environmental protection, consumer protection and the like, but those regulations can be, and often are, used to protect domestic goods against imports, either by effectively excluding them or by making the cost of compliance so high as to dissuade foreign competition.

In these negotiations, Canada is looking for a formal, cooperative framework that would see EU and Canadian regulators obliged to regularly meet and consult on regulatory initiatives. While no country will abandon its right to regulate as it sees fit in the public interest, a formal mechanism to examine regulatory differences may well be as much progress as Canada can expect. Greater transparency, advance notice of regulatory initiatives and some efforts at mutual recognition of approvals or certification would all go a long way to easing the regulatory burden that faces businesses in foreign markets.

Intellectual Property

Intellectual property is proving to be a difficult area of negotiation for Canada. In a leaked draft of an early version of the negotiating text, it seems that the European position was that Canada should simply adopt the EU's strict rules for the protection of intellectual property. The EU is seeking greater copyright protection, longer patent protection for pharmaceuticals and recognition of its geographic indicators (GI).

The Harper government is committed to providing stronger copyright protection but has repeatedly failed to get the necessary legislation through Parliament. Now, with a majority government, revisions to the Copyright Act are expected to be passed quickly and the new legislation is likely to satisfy the EU on copyright protection.

Extended patent protection or pharmaceuticals is a much thornier issue. Canada hosts a strong generic drug sector and the Harper government has not shown that it is ready to extend the life of drug patents; any attempt to do so would be opposed by Canada's generic drug industry, would significantly add to the cost of Provincial medical plans and would be widely unpopular with consumers. It is impossible to predict what Canada will do on the issue but it is unlikely that any concessions will be made in the CETA negotiation.

Labour Mobility

A major Canadian objective is to gain greater access to the EU labour market for Canadians, particularly for temporary business entry and inter-corporate transfers and to make progress on the mutual negotiation of qualifications. The deal will likely have easier access to the EU for temporary entry for businessmen and professionals but will not touch permanent entry or visa issues. On the difficult mutual recognition issues, the most likely outcome will be an institutional framework within which progress can be made over time.

Conclusion

While the prospects for an ambitious deal look good, there are still road blocks ahead. Five provincial elections will be held this fall, including one in Ontario and the proposed agreement calls for major concessions from the provinces. While the negotiators proudly claim agreement on well over 90% of the issues, they have pushed all of the difficult issues to the end, hoping that once politicians see how much is on the table, difficult political choices and concessions will become easier. In Canada, those difficult choices will include making concessions on supply management, provincial monopolies such as Hydro-Quebec and the LCBO procurement and many others.

Even if a deal is signed, implementation may take years. While the 2009 Treaty of Lisbon gave the EU increased authority to act in international matters, it is not clear that it has the authority to sign the agreement and bind all the Member States. If any part of the CETA requires ratification by Member States, that process could easily take five years. The issue is still unresolved. In April the EU published the text of the EU Agreement with Columbia and Peru and the title page contained a bracketed reference to [Member States] as signators – confirming that doubt still exists on the EU's authority to sign comprehensive trade agreements. In light of that, the negotiations are exploring provisional implementation pending ratification.

Footnotes

In the 2010 Canada-U.S. Agreement on Procurement, provinces and municipalities did provide significant but temporary access to their procurement markets in return for limited concessions on U.S. Buy America rules.

www.fasken.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions