A competitive advantage for all Canadians
The historic Canada and European Union (EU) Comprehensive Economic and Trade Agreement (CETA) is by far one of Canada’s most ambitious trade initiatives, setting new standards in the trade in goods and services, non-tariff barriers, investment, government procurement, as well as other areas like labour and environment. CETA opens new markets in the EU for our exporters and generates significant benefits for all Canadians.
The EU is the world’s second largest economy and Canada’s second largest trading partner after the United States. It is also the world’s second largest importing market for goods. The EU’s annual imports alone are worth more than Canada’s GDP. Preferential access to this large, dynamic market offers tremendous opportunities and a real competitive edge for Canada.
What does CETA cover?
CETA covers virtually all sectors and aspects of Canada-EU trade in order to eliminate or reduce barriers. CETA addresses everything from tariffs to product standards, investment, professional certification and many other areas of activity. The agreement’s broad scope—including improved access to EU markets for goods and services; greater certainty, transparency, and protection for investments; and new opportunities in EU procurement markets—translate into real benefits for Canadians and contribute to Canada’s long-term prosperity.
What this means:
Prior to CETA’s entry into force, only 25 percent of EU tariff lines on Canadian goods were duty-free. On the day that CETA entered into force, 98 percent of EU tariff lines became duty-free for Canadian goods, and an additional one percent will be eliminated over a seven-year phase out period. Tariff elimination will provide enhanced export opportunities into the EU market for Canadian producers, processors, and manufacturers, as well as for agricultural and agri-food products, fish and seafood, forestry goods, and the full range of industrial goods.
CETA’s most visible benefit is the ambitious obligation undertaken by Canada and the EU to eliminate tariffs. Tariffs are essentially taxes levied at the border that have the effect of increasing the costs to consumers of imported goods. These tariffs are applied to “tariff lines,” where each line represents a specific product. Some of these tariffs can be very high (for example, the pre-CETA EU tariff on frozen mackerel was 20 percent and the pre-CETA EU tariff on oats was around 51.7 percent), which made it more difficult for imported Canadian goods to compete in the EU market.
For Canadian producers, manufacturers and exporters, the progressive elimination of EU tariffs provide increasingly better competitive market access terms for their products over time. Tariffs that are subject to a phasing out by the EU will include, for example, those on some fish and seafood products, grains, and passenger vehicles. Once CETA is fully implemented, seven years after entry into force, approximately 99 percent of the EU’s tariff lines will be duty-free.
What this means:
Canadian exporters have clear and favourable rules that take into consideration Canada’s supply chains, in order to determine which goods are considered “made in Canada” and therefore eligible for preferential tariff treatment.
CETA’s rules of origin strike a good balance, respecting the real-world sourcing patterns of Canadian and European companies while encouraging production to take place in Canada or the EU. CETA provisions relating to autos and other areas, as well as language on cross-cumulation, potentially allow for third parties (with whom the EU and Canada have FTAs) to be brought into a single free trade area encompassing Canada, the EU, and the third party.
What this means:
Canada and the EU share a desire to keep customs procedures simple, effective, clear, and predictable so as to reduce processing times at the border and make the movement of goods cheaper, faster, more predictable and efficient.
CETA includes commitments that aim to:
- provide importers/exporters with all the information they need on importing or exporting, including advance rulings on the origin of goods or tariff classification;
- simplify and, where possible, automate border procedures;
- respect the privacy of company information collected for customs purposes; and
- provide an impartial and transparent system for addressing complaints about customs rulings and decisions where there may be differences of opinion.
What this means:
CETA helps to ensure that unnecessary or discriminatory regulatory requirements do not diminish the value of new market access to the EU. Cooperation and information sharing between Canadian and EU regulators result in more compatible regulatory measures that could make it easier for Canadians to do business in the EU.
CETA is the first bilateral trade agreement in which Canada has included a stand-alone chapter on regulatory cooperation. Cooperation in regulatory matters is forward-looking and promotes good regulatory practices and engagement early on as measures are being developed. By fostering cooperation earlier in the regulatory process, differences in regulatory approaches between Canada and the EU may be reduced, resulting in fewer barriers to trade once regulations are finally put in place.
CETA also includes a protocol on conformity assessment, which allows Canadian companies in a number of sectors to have their products tested and certified for the EU market right here in Canada. This is a significant innovation which saves companies time and money and is particularly useful to small and medium-sized enterprises.
What this means:
Canadian companies can bid on opportunities at all levels of the EU government procurement market, which is worth an estimated $3.3 trillion annually.
People and companies are not the only ones active in the marketplace. Governments are also important participants, whether through the purchase of office material or the construction of roads and bridges. CETA’s commitments expand and secure opportunities for Canadian firms to supply their goods and services to all levels of EU government, including the EU’s Member State governments, thousands of regional and local government entities, and a large array of entities operating in the utilities sector.
Canada has also agreed to broad coverage at the federal, provincial and municipal levels, which helps procurement processes be carried out in an open and transparent manner to ensure that taxpayers get the best value for their money. CETA applies only to high-value procurement contracts in order to ensure that governments can continue to use procurement to support local development, especially small and medium-sized enterprises. Nevertheless, certain important exceptions are built into CETA’s government procurement rules, as they always have been in Canada’s other free trade agreements. These include exceptions for cultural industries, Aboriginal businesses, defence, research and development, financial services, and services in the fields of recreation, sport and education, as well as social and health-care services.
What this means:
Canadian service providers have more business opportunities in the EU. Furthermore, CETA makes it easier for certain skilled professionals to work temporarily in the EU.
CETA gives Canadian service suppliers the best market access the EU has ever granted to any of its free trade agreement partners. This means that Canadian suppliers in most service sectors are on an equal footing with EU service providers and receive better treatment than most of their non-EU competitors. CETA uses a negative list approach, meaning that all services sectors are covered unless explicitly listed as otherwise.
As in all of its free trade agreements, Canada has excluded from coverage certain types of services because they are fundamental to our social fabric. Among the key services excluded are health care, public education and other social services.
CETA’s temporary entry provisions make it easier for highly skilled professionals and businesspeople, such as engineers and senior managers, to work in the EU. CETA’s temporary-entry provisions expand on existing WTO access by setting a framework to facilitate temporary travel or relocation for selected categories of business persons, including short-term business visitors, investors, intra-company transferees, and professionals and technologists. As a result of CETA, Canadian firms and independent professionals have greater certainty when establishing branches in the EU, bidding on EU service contracts and providing installation and maintenance services for goods sold in the EU market. CETA’s labour mobility provisions do not displace permanent jobs in Canada or the EU. Instead, the Agreement commits Canada and the EU to a range of measures designed to enhance the ability of our business persons to move across our borders.
What this means:
Investment provisions in CETA are designed to give investors greater certainty, stability, and protection for their investments and to secure access to each other’s respective market.
CETA’s investment rules set out how investors and their investment must be treated by the host country. At the heart of these rules are commitments to treat investors and investments fairly, equitably and no less favourably than domestic or other foreign investors.
CETA’s investment chapter includes:
- strengthened provisions on the right to regulate for all levels of government;
- a revised process for the selection of Tribunal Members to adjudicate disputes—notably, investors are no longer able to choose members of the tribunal;
- more detailed commitments on ethics for Tribunal Members; and,
- the establishment of an appellate mechanism that will become operational only after Canada and the EU agree to the administrative and operational aspects of its functioning.
Under CETA, Canada also maintains the ability to review major acquisitions from investors in the European Union. Investors are not able to challenge genuine regulatory action by states and governments retain their right to regulate in the public interest.
What this means:
CETA includes clear commitments to uphold Canada’s high standards and not to undermine them for commercial gain. Clear language confirms the right to regulate for all levels of governments.
Under CETA, Canada and the EU commit to effectively enforce domestic environmental law and not to waive or derogate from those laws in order to encourage trade or investment. EU producers that wish to export and sell their products in Canada must fully respect the relevant Canadian regulations and vice versa. Both Canada and the EU retain the right to regulate in the public interest.
CETA includes provisions to ensure that domestic proceedings are available to remedy violations of environmental law. It also allows for consultations between Canada and the EU regarding any issue in this area. Should consultations be unsuccessful in resolving the issue, CETA provisions allow for the establishment of a panel of experts to prepare a final report with findings and recommendations on the issue, and which are made available to the public.
Canada and the EU have also committed to seeking high levels of labour protection and enforcing labour laws. Specifically, the Agreement includes a commitment to ensure that national laws and policies provide protection for the fundamental principles and rights at work, including the right to freedom of association and collective bargaining, the abolition of child labour, the elimination of forced or compulsory labour, and the elimination of discrimination.
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