EU-Canada CETA: Seven things to Know

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After a week more akin to the nail-biting final minutes of a suspense film, the European Union (EU) and Canada have finally signed the Comprehensive Economic and Trade Agreement (CETA) yesterday Sunday, October 30, 2016. This sets the stage for the agreement to be provisionally applied.

Here are seven quick things to know about CETA:

  1. CETA is the EU’s first completed free trade agreement with a G-7 country and its most ambitious trade agreement to date -By numbers, it encompasses over 500 million people (500 million in the EU-28 and 35 million in Canada), 29 countries and 24 languages. Prior to CETA’s signature, trade relations between the EU and Canada were guided by the Framework Agreement for Commercial and Economic Cooperation, in force since 1976 as well as a number of sectoral agreements.
  2. Canada was the EU’s 11th largest trading partner in 2015 – This is according to EUROSTAT data as at April 2016 which valued Canada-EU trade in 2015 at 63,479 million euro, accounting for 1.8% of EU trade with non-EU partners. On the flip side, the EU is second only to the United States as Canada’s largest trading partner. According to Statcan data, Canada exported $39,454.8 million ($CAN) in goods to the EU in 2015 and imported $53.004.5 in the same period.
  3. CETA was several years in the making –  Negotiations between the EU and Canada began in 2009. The text of the Agreement was concluded in 2014 and received legal approval in February 2016. However,the agreement has had to overcome several hurdles, including the fact that as a “mixed” agreement under EU law, it had to obtain the approval of each of the 28 EU member countries (in accordance with their own constitutional arrangements). There has been popular and political opposition to the Agreement, including the impasse between the Belgium Federal Government and the regional government of Wallonia which had threatened  to be the final nail in the coffin until a last minute internal deal saved the day. Despite the resolution of this political impasse, some popular dissent towards the Agreement remains as evidenced by the anti-CETA protests.
  4.  Almost 99% of tariffs will be eliminated on goods trade between the EU and Canada – The exceptions are a few sensitive agricultural products. However, tariff-eliminations are only a small part of CETA and the Agreement is WTO-plus in many aspects. It includes provisions on trade in services, investment, sustainable development, labour, environment, inter alia. It also opens up the procurement market in the EU and Canada so businesses in those countries can bid on government contracts in each other’s countries.
  5. CETA provides for a novel Investment Court System – The permanent bilateral investment tribunal provided for in CETA’s Investment Chapter (Chapter 8) is a marked departure from the ad hoc tribunals used in traditional investor-state dispute settlement (ISDS) systems. The tribunal will be comprised of 15 members (five EU nationals, five Canadian nationals and five nationals of third states). In addition to this new ISDS system, the investment chapter provides more explicit language regarding the State’s right to regulate, an appellate tribunal, greater provisions on transparency of proceedings and conflict of interests, as well as commitment by the EU and Canada towards the shared objective of working towards the establishment of a permanent multilateral investment court.
  6. CETA is expected to boost income in both the EU and Canada. According to a 2008 joint study by the European Commission and the Government of Canada, conducted prior to the launch of the negotiations, it was found that the annual real income gain within seven years of CETA’s implementation is to be an estimated 11.6 billion euros for the EU and 8.2 billion euros for Canada. The stated benefits of CETA are job creation, a liberalised procurement market, increased merchandise and services trade and investment flows between Canada and the EU and cheaper goods and services for consumers.
  7. CETA will be the benchmark for future agreements signed by both the EU and Canada with subsequent trade partners. The standard of ambition in the Agreement is high. CETA is likely to be the last trade agreement signed by the UK as an EU-member before the UK is expected to make its Article 50 notification and BREXIT negotiations begin (slated for March 2017).

The full text of the Agreement may be viewed here.

Alicia Nicholls Consulting Legal Researcher at FRANHENDY ATTORNEYS

 

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