On February 15, 2017, the European Parliament approved the Comprehensive Economic and Trade Agreement (CETA), a free trade agreement between the European Union (EU) and Canada. CETA’s primary goal is to foster mutual Canadian and European economic growth by eliminating 98% of tariffs and bringing harmony to regulatory rules and regimes that affect trade, thereby expanding the already significant trading relationship. In 2015, the EU was Canada’s second most important trading partner, with around 9.5% of Canada’s total external trade in goods. Canada was the EU’s 12th most important trading partner, with around 1.8% of the EU’s total external trade in 2015. CETA is being heralded by many as a victory for free trade and international cooperation.
This article will highlight some of CETA’s possible benefits and drawbacks, its effects on Canadian law, and the next steps that are required for its full implementation and application.
POTENTIAL BENEFITS AND DRAWBACKS
The Canadian federal government predicts that CETA will provide significant beneficial macroeconomic effects in Canada, including:
- increasing the market competitiveness of Canadian goods and services in the EU by eliminating tariffs;
- allowing Canadian companies to bid for EU public contracts;
- increasing economic efficiency and productivity by fostering competition between Canadian and European firms; and
- saving hundreds of millions of dollars for Canadian consumers by eliminating tariffs on European goods and services
The combination of these effects may result in significant job growth in Canada and raise the GDP.
The European Commission also predicts that CETA will have a number of high level benefits to the EU, including:
- removing over €500 million of customs duties on EU exports, making EU products more competitive in the Canadian market;
- allowing EU companies to bid for Canadian public contracts; and
- providing EU firms with increased opportunities to provide services in Canada.
In addition to these high level benefits, the Canadian federal government predicts that CETA will have beneficial industry-specific impacts as well. For example, CETA will increase regulatory cooperation between Canada and the EU by easing technical barriers such as labelling, testing, and certification requirements. Increased regulatory cooperation will make it less expensive for Canadian firms that manufacture highly technical products to do business in the EU, and vice versa.
Additionally, the federal government predicts that CETA will have a beneficial impact on various key Canadian industrial sectors such as, among others, agriculture and agri-food, clean technologies, medical devices, metals, mining and minerals, oil and gas, and pharmaceuticals. In each of these fields, Canadian firms, producers and manufacturers stand to benefit.
In each of these sectors, the Canadian federal government predicts that CETA will increase opportunities for foreign investments, open up European markets to Canadian goods and products, and increase opportunities for the development of traditional and new and innovative products.
However, other experts predict that CETA may have considerable drawbacks, both on a macro and microeconomic level. From a broad perspective, a recent report from UN economic researcher Pierre Kohler and Delft University economist Servaas Storm predicts that Canada may lose approximately 23,000 jobs due to increased economic efficiency. The authors further argue that CETA will lead to depressed wage growth because labour will be replaced with cost-cutting “capital-intensive technologies”. This could each Canadian to lose approximately $2,460.00 per year.
Specific Canadian industries may lose as well. Relaxed regulatory standards may ease the export burden of EU manufactured automobiles into Canada, thereby challenging the Canadian auto industry. Additionally, Ontario and Quebec dairy farmers may lose out on their entrenched Canadian market position due to competition with duty-free dairy products from the EU.
CETA will have an impact on Canadian intellectual property law. First, CETA requires Canada to implement and comply with the Singapore Treaty on the Law of Trademarks, the Protocol related to the Madrid Agreement concerning the International Registration of Marks, and the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs. The Canadian federal government states these obligations “will encourage more effective trademark and industrial design procedures based on international standards”.
Second, CETA will ban Canadian companies from selling products with names that imitate European regional dishes. For example, “Gorgonzola cheese” produced in Canada must explicitly indicate on the packaging that it is only an imitation of the northern Italian cheese.
Third, CETA will affect patent protection terms for pharmaceutical products. For example, CETA will provide pharmaceutical innovation companies with a right of appeal after generic manufacturers receive drug approvals.
CETA will also introduce an efficient and innovative dispute settlement process. CETA’s dispute settlement regime is based on the World Trade Organization’s Dispute Settlement Understanding model, but with a significantly shorter timeframe which allows for an accelerated arbitration procedure when urgent resolutions are needed. CETA also includes specialized dispute settlement provisions for financial services, taxation, labour, and environmental issues. Recently, Canada and the EU agreed to amend Chapter Eight (Investment) of CETA, by introducing a new tribunal called the Investment Court System, which will settle investor-state disputes.
The European Parliament’s decision to ratify CETA is only the first in a number of steps that are required to fully implement the agreement. The national parliaments of each of the EU member states will have to vote to implement CETA through their own respective national ratification procedures. On February 23, 2017, the Latvian Parliament ratified CETA, the first member state to do so. National approval by each EU member state may be met with significant internal opposition in certain of those member states, and may take far longer than it took for the European Parliament to approve the agreement.
In Canada, the federal government is ultimately responsible for the application and implementation of CETA. However, while the provincial governments are obliged to fulfill any CETA obligations falling under a provincial head of power, the federal government does not have the power to enforce compliance. How a post-Brexit United Kingdom fits into CETA is currently unknown. Trade experts predict that CETA has established the foundations and framework for a future free trade deal between Canada and the United Kingdom, but no details have been finalized.