Canada: Moving Towards EU-Canada Economic Agreement: Results Of Scoping Exercises And Commitment To Negotiate

Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on International Trade & Investment, May 2009

On May 6, 2009, at the Canada-EU Summit in Prague, Czech Republic, Prime Minister Stephen Harper, along with European Union President Mirek Topolánek and European Commission President José Manuel Barroso announced the historic launch of negotiations towards an economic partnership agreement between Canada and the European Union. The negotiations will be guided by a joint "scoping exercise" that culminated in the Joint Report on the EU-Canada Scoping Exercise (Joint Report) which outlines those areas proposed by both parties as subjects for upcoming negotiations.

JOINT REPORT

The Joint Report notes that the "well-being and prosperity of the EU and Canada depend on healthy international trade and investment relationships", citing the fact that the EU is the world's largest exporter of goods and services, as well as the fact that one in five Canadian jobs is estimated to be linked to trade.

While both parties state their commitment to advancing the Doha round of multilateral negotiations at the World Trade Organization (WTO), they note a shared interest in strengthening their bilateral economic partnership. Currently, this bilateral relationship is governed by a co-operative framework established in 1976, and both parties are now seeking an ambitious, comprehensive and binding single economic agreement to replace the 1976 framework.

The Joint Report indicates that commitments under this new agreement should go beyond current WTO levels and should include, as a minimum, all the chapters of the most ambitious EU and Canadian bilateral economic agreements to date.

The Joint Report sets out 15 topics which the scoping exercises yielded as being the subjects for discussion in the upcoming negotiations:

• Trade in Goods. The Joint Report indicates that the level of any tariff elimination should be considerably more comprehensive and ambitious than required by Article XXIV of the GATT, and that no tariff lines should be excluded a priori. The agreement should also include clear rules of origin that leave little room for administrative discretion, address agricultural export subsidies and state trading enterprises, examine the possibility of including provisions related to emergency action and trade remedies, and substantially reduce non-tariff barriers to trade.

• Sanitary and Phytosanitary Issues. While building on the WTO Agreement on Sanitary and Phytosanitary Measures is a priority of the parties, they further recommended the establishment of a mechanism to address specific issues not covered in the existing Canada-EU Veterinary agreement.

• Technical Barriers to Trade. Provisions on this topic should "reaffirm, build on and enhance" existing WTO provisions, notably in the areas of transparency, international standards, technical regulations and conformity assessments. The development of a mechanism to deal with technical barriers to trade was also proposed.

• Trade Facilitation. The objectives of trade facilitation negotiations will be efficiency, transparency, co-operation and consultation. The parties have expressed the view that the challenges faced by small and medium-sized enterprises should be taken into consideration in negotiations.

• Customs Procedures. The goal of negotiations in respect of customs procedures will be to formulate rules of origin that are effective and transparent in their administration. The parties will also take into account the existing Agreement between Canada and the European Community on Customs Cooperation and Mutual Assistance in Customs Matters in an effort to avoid duplication.

• Cross-Border Trade in Services. The parties are hoping to achieve substantial sectoral coverage in terms of liberalizing trade in services. Negotiations in this connection are expected to be considerably more ambitious than the current WTO commitments and involve issues of market access, non-discrimination and compliance with Article V of the GATS. The Joint Report also indicates that the agreement will contain provisions in respect of the mutual recognition of professional qualifications.

• Investment. Canada and the EU have expressed a desire to increase bilateral investment flows between the two jurisdictions. The Joint Report notes that provisions in the agreement regarding investment should cover pre- and post-establishment in all sectors, and should include substantive and procedural obligations at central and sub-central government levels.

• Government Procurement. As a starting point for negotiations, the parties will look to the procedural commitments contained in the November 2007 revised text of the Government Procurement Agreement. They intend to substantially improve access to public procurement markets in all sectors, ensuring treatment no less favourable than that given to local suppliers, and to increase transparency.

• Regulatory Co-operation. The parties wish to avoid "unnecessarily divergent" regulatory approaches, and proposed regulatory co-operation in specific areas to complement the voluntary framework that is already in place.

• Intellectual Property. The parties noted that any agreement should substantially improve on all categories of IP rights where needed beyond the minimal protection afforded under the relevant WTO agreement (TRIPS), and will also cover geographical indications.

• Movement of Persons. The Joint Report notes that provisions on the legitimate temporary movement of persons related to bilateral trade and investment should be included as a topic in negotiations.

• Competition Policy and Other Related Matters. The Joint Report notes that exploratory talks aimed at improving the exchange of information between competition authorities are already underway. The existing agreement between the parties on the application of their competition laws form the basis for co-operation, and any future agreement should include related disciplines (e.g., state aid).

• Institutional Arrangements and Dispute Settlement. According to the parties, provisions on this topic should include a binding state-to-state dispute mechanism, as well as appropriate mediation mechanisms.

• Sustainable Development. Provisions on environment, labour rights and corporate social responsibility standards were identified by the parties as being appropriate. The Joint Report also notes the desirability of early liberalization of environmental goods and services.

• Other Areas. This residual category heading was formulated by the parties to provide for some flexibility in the scope of the agreement, permitting expansion where there is mutual interest in doing so.

While there appears to be a great deal of optimism surrounding the negotiations, one possible stumbling block may be the EU early insistence that all provinces and territories sign on. While the vast majority have publicly supported these negotiations, the premier of Newfoundland and Labrador has voiced concerns over the federal government's protection of Newfoundland's interests. The premier's concerns may be attributable to political tension between the premier and the Canadian prime minister or the EU movement towards imposing a regional ban on seal products and high tariffs on seafood.

IMPORTANCE OF THE AGREEMENT

The EU is Canada's second-largest export market and second-largest investor (surpassed only by the U.S.). Canada is the EU's fourth-largest source of foreign direct investment, and two-way trade in merchandise reached C$90.4-billion in 2008. A 2008 joint EU-Canada study estimates that this agreement could increase bilateral trade by more than 20% in the space of a few years. Thus, any agreement on these 15 issues is expected to have significant ramifications for both parties.

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