Canada: Canada May Not Celebrate CETA Provisional Implementation On July 1, 2017

Last Updated: June 15 2017
Article by Cyndee Todgham Cherniak

Months ago it was announced that the Canada-EU Comprehensive Economic and Trade Agreement ("Canada-EU CETA") would be provisionally implemented on July 1, 2017. Bill C-30 "Canada-European Union Comprehensive Economic and Trade Agreement Implementation Act" received Royal Assent on May 16, 2017. This does not mean that Canada has taken the formal steps required to ratify the Canada-EU CETA. To the best of our knowledge, Canada has not sent the formal notification (a diplomatic note) to the EU concerning formal ratification. Canada has passed a statute (that is, Bill C-30), but still must implement the necessary regulations (that is, many regulations) and establish governmental processes required to implement the Canada-EU CETA. Provinces also must take legislative and regulatory steps to implement the Canada-EU CETA. It is now June 14, 2017 and the Canada Gazette is not full of CETA-related regulations. Could all of this happen before July 1, 2017? I am concerned that the target date will come and go without regulations, ratification and, therefore, provisional implementation.

Today, a dispute relating to cheese quota was reported by the CBC in an article entitled "Canada-EU trade deal's July 1 target threatened by new cheese dispute". This has caused Prime Minister Trudeau to respond (as reported by the CBC in a video "Trudeau on new Canada EU cheese dispute". This is breaking news because everyone has been wondering when the Government of Canada would announce the process for applying for the Canada-EU CETA new entrants quota.

In short, it has been leaked that Canada will provide 60% of the new cheese quota to domestic dairy producers and farmers (in Quebec). It has been reported that the proposed allocation (which has not yet been publicly announced) has caused the European Union to become concerned. In Annex 2-B, "Declaration of the Parties concerning tariff rate quota administration" of the Canada-EU CETA, Canada has agreed to allocate cheese quota using an import licensing system on an annual basis. The EU cheese quota allocation method must allow for new entrants each year. During the phase-in period from Year 1 to Year 5, at least 30 per cent of the tariff rate quota must be available to new entrants every year. After the end of the phase-in period from Year 6 and in subsequent years, at least 10 percent of the tariff rate quota quantity will be available for new entrants. Canada's proposed allocation to domestic producers rather than retailers, specialty cheese retailers and restaurants may go against the spirit of the CETA agreement. During the Canada-EU CETA negotiations, cheese quota was an important negotiating point for the EU negotiators. Allowing Canadian dairy producers to control much of that quota is believed to diminish the agreed-upon market access provisions.

Cheese is an important sticking point that has arisen, but is not the only sticking point. Canada's proposed regulations (which also have not been released to the public) also pose some concerns. Which regulations are of concern is not known – I have only been informed that the issues go beyond cheese. This was confirmed by Minister Champagne in a statement reported by the CBC in which Minister Champagne said:

"The final few days before provisional implementation involve a number of conversations and discussions to make sure that both sides understand the regulations that are being put in place."

We have been informed that some would prefer to delay implementation to get the regulations right, rather than rushing. This does not bode well for a Canada Day celebration with EU cheese and wine and spirits.

We also understand that one or more provinces have not taken the steps required to implement their government procurement commitments into provincial law. We are trying o determine which provinces are causing the delay (we assume it is British Columbia and Nova Scotia who recently held elections, but are also looking at whether Ontario and Quebec have taken all steps required). This is the more important issue because the value of the trade in goods and services under the procurement chapter of the Canada-EU CETA dwarfs the cheese quota.

In other words, there are a few hurdles before provisional implementation of the Canada-EU CETA.

It would be helpful to Canadian businesses if the Canadian government would be more transparent about the provisional implementation date and the problems that are arising. Canadian businesses need to prepare for provisional implementation. Goods cannot arrive for July 1, 2017 provisional implementation if they are not ordered in advance. While Trade Minister Champagne is saying that the hope is that the issues will be resolved in the next 10-14 days (that means by June 28, 2017), this is not certain and does not give Canadian businesses much time to review new regulations, apply for cheese quota and place orders for European goods.

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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