Canada: EU And Canada Agree On Economic And Trade Agreement (CETA)

Last Updated: November 1 2013
Article by Sven Walker

After years of negotiations, the President of the European Commission, José Manuel Barroso, and Canadian Prime Minister, Stephen Harper, agreed on the key elements of a Comprehensive Economic and Trade Agreement (CETA) on October 18, 2013. It will be the first bilateral free trade agreement between the European Union and a G8 country.

Extending their trade relations will generate new opportunities for economic growth and the creation of jobs in both Canada and the EU.

It is anticipated that the deal will have far reaching impacts, touching almost every sector of the Canadian economy as well as millions of workers and consumers. The agreement with the 28-member European Union covers everything from the automotive sector to agricultural tariffs to intellectual property.

The key elements of CETA can be summarized as follows:

  • Elimination of duties and tariffs – Most importantly, CETA will remove over 99% of tariffs between the two economies. This will have a big impact on import and export. Key sectors of the Canadian economy, such as agriculture may benefit as Canada and the EU will liberalize, respectively, 92.8 % and 93.5 % of trade lines in agriculture.
  • Liberalization of the trade in services CETA will liberalize trade in services, in particular financial services (investments), telecommunications, energy and transport.
  • Temporary movement of company personnel – In order to support trade in services and investment, CETA will also make it easier for firms to move staff temporarily between the EU and Canada. This will make it easier for domestic companies to run their operations in Europe. Certain categories of professionals will also have easier access to temporarily supply services such as consultancy in a variety of sectors like engineering, accounting or architecture.
  • Mutual recognition of qualifications – CETA provides a framework for the future mutual recognition of qualifications for professionals, such as architects, engineers, and accountants. At the moment, the lack of coherent requirements for professionals remains a critical barrier, especially for providing cross-border services.
  • Recognition of Standards in the Automotive Sector – Canada will recognize a list of EU vehicle standards and will examine the recognition of further standards. It will also be easier to export European cars to Canada.
  • Public procurement – CETA also provides for the opening up of the Canadian public procurement markets to European proponents.
  • Intellectual Property Rights CETA also includes provisions on the protection of trademarks, designs and copyrights ensuring a high standard of intellectual property rights protection.
  • Sustainable development Both Canada as well as the EU reaffirmed their strong commitment to the principles and objectives of sustainable development in trade. This means that investment and trade should not develop at the expense of the environment or social and labour rights, but rather foster economic growth, social development, and environmental protection.

As Canada and the U.S. have already liberalized their trade under the North American Free Trade Agreement (NAFTA), this agreement will afford Canadian companies with better access to the European market and vice-versa for European companies. Canada has been eager to reach this trade deal, believing access to the EU's $17-trillion economy will boost gross domestic product by $12-billion and create up to 80,000 jobs.

It is anticipated that consumers will benefit from the changes arising from this agreement and that products and services from Europe will become less expensive. As a result, Canadians may pay less in the future for thousands of products made in Europe, such as cars, which are currently subject to a 6 per cent tariff.

Based on 2011 figures, the EU was Canada's second most important trading partner after the US, representing 10.4% of Canada's total external trade. The value of bilateral trade in goods between the EU and Canada was about € 62 billion in 2012. Once implemented, the agreement is expected to increase two-way bilateral trade in goods and services by 23% or € 26 billion, resulting in economic growth and creation of employment on both sides of the Atlantic.

Canada's Prime Minister Stephen Harper acknowledged that in the short term there might be some negative effects to some sectors, but he said compensation is being considered. However, the overall benefits of CETA outweigh any problems. Mr. Harper has stated that "this agreement is vastly positive for the Canadian economy across the board [...] This is not just a big deal, it is a very, very positive deal for Canada."

"This is a highly ambitious and far-reaching trade agreement of great importance for the EU's economy," agrees Barroso, President of the European Commission. "This agreement will provide significant new opportunities for companies in the EU and in Canada by increasing market access for goods and services and providing new opportunities for European investors."

On the basis of this political breakthrough, the negotiators will now be able to settle all of the remaining technical issues. The agreement will need to be approved by Canada's provinces and territories and as well as the member states of the European Union.

Further information on this topic can be found at http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/canada/. Further information on next steps required to implement the agreement can been found online at: http://trade.ec.europa.eu/doclib/docs/2012/june/tradoc_149616.pdf.

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.

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