In Canada, as is the case in many other countries, "cabotage" laws exist which means that foreign registered vessels cannot perform commercial marine operations solely within domestic waters unless there are no Canadian registered vessels available to perform the task.
The Canadian government has recently concluded negotiations of the Canada-European Union Comprehensive Economic and Trade Agreement ("CETA"). The specific wording of the agreement has not yet been released, but based on information provided by the government, the proposed terms appear to change Canadian cabotage laws as they currently exist under the Coasting Trade Act and in certain circumstances open up Canadian waterways to EU companies and EU and other foreign vessels.
Canadian labour organizations and ship owning groups have expressed concerns about these changes.
CETA is intended to be a comprehensive trade agreement encompassing all elements of modern trade. The desired objective on the Canadian side is to lift Canadian trade restrictions in exchange for preferential access to the EU, Canada's second-most important trade and investment partner. The EU is considered world's largest economy, with more than 500 million consumers and a GDP of $18 trillion.
With respect to maritime services, CETA would allow:
- EU entities to use non-Canadian vessels to reposition their empty containers between ports in Canada, on a non-revenue basis;
- EU registered vessels to be used to provide feeder services for cargo between the Ports of Halifax and Montreal: both bulk and containerized cargo for continuous service using vessels on EU first registries; and, containerized on a single voyage where it is part of an international leg using vessels on EU first or second registries;
- EU entities to use vessels of any registry for commercial dredging services contracted by private entities; and
- For federally-procured dredging contracts, EU entities will be permitted to bid on contracts exceeding the procurement thresholds for construction services using EU-registered (and built/modified) vessels. The procurement thresholds are the same as those currently found in the World Trade Organization's Agreement on Government Procurement (C$7.8 million).
None of the foregoing activities would be permitted under the current law.
A number of unions have joined forces under the name of the Canadian Maritime & Supply Chain Coalition for the purpose of studying the possible effects of CETA and defending Canadian jobs. Other organizations such as the Canadian Shipowners Association have expressed the concern that there was a "the lack of transparency in the CETA negotiations and the fact that access to trades between Canadian ports may be given to EU carriers, who employ international labour at much lower rates, do not pay Canadian taxes or employ Canadian workers and are not regulated to the rigorous Transport Canada safety and operating standards imposed on Canadian flagged vessels."
The Canadian dredging industry provides services to harbours and navigable waters as well as providing environmental remediation services for inland tailing ponds at places such as the oil sands projects in Alberta. The size and age of Canada's dredging fleet may create significant business opportunities in Canada for EU entities.
In our view, it is doubtful that the US will push for similar changes to NAFTA as traditionally it has fiercely protected its own cabotage laws. However, American companies may pursue joint venture opportunities with European entities in order to enter this door into the Canadian commercial marine market and to take advantage of these changes to Canadian cabotage laws.
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