Table of Contents
- 0. Preamble
- 1. General Definitions and Initial Provisions
- 2. National Treatment and Market Access for Goods
- 3. Trade Remedies
- 4. Technical Barriers to Trade
- 5. Sanitary and Phytosanitary Measures
- 6. Customs and Trade Facilitation
- 7. Subsidies
- 8. Investment
- 9. Cross-Border Trade in Services
- 10. Temporary Entry and Stay Of Natural Persons For Business Purposes
- 11. Mutual Recognition of Professional Qualifications
- 12. Domestic Regulation
- 13. Financial Services
- 14. International Maritime Transport Services
- 15. Telecommunications
- 16. Electronic Commerce
- 17. Competition Policy
- 18. State Enterprises, Monopolies and Enterprises Granted Special Rights or Privileges
- 19. Government Procurement
- 20. Intellectual Property
- 21. Regulatory Cooperation
- 22. Trade and Sustainable Development
- 23. Trade and Labour
- 24. Trade and Environment
- 25. Bilateral Cooperation and Dialogues
- 26. Administrative and Institutional Provisions
- 27. Transparency
- 28. Exceptions
- 29. Dispute Settlement
- 30. Final Provisions
- Protocol II: Mutual Acceptance of the Results of Conformity Assessment
- Protocol III: Good Manufacturing Practices for Pharmaceutical Products
The Preamble is the introductory statement in the Agreement. It outlines the joint commitments and aspirations of Canada and the EU (the Parties), and provides the political context in which they negotiated CETA. Political commitments made in the Preamble, such as the recognition of Canada and the EU’s right to regulate to achieve public policy objectives, provide an agreed basis for the interpretation of CETA.
The Parties affirm in the Preamble the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions, which recognizes that sovereign states have the right to preserve, develop and implement their cultural policies for the purpose of strengthening cultural expression and preserving cultural identity. The Preamble also references the importance of international security and human rights in the development of international trade and economic cooperation, to reflect the values and principles shared between Canada and the EU. The Preamble affirms the commitment of the Parties to promote trade and investment while recognizing the importance of sustainable development and environmental protection. Finally, in the Preamble Canada and the EU recognize the economic importance of innovation and they commit to encourage and promote cooperation between relevant public and private sector entities in the area of innovation, research and development and science and technology.
1. General Definitions and Initial Provisions
CETA includes several chapters which set out institutional and administrative provisions that apply to the entire Agreement. These provisions establish the framework by which the Agreement will be interpreted, managed and implemented. General Definitions and Initial Provisions is the first of these chapters.
The General Definitions section sets out a number of specialized and important terms used in multiple chapters of the Agreement. Additional terms specific to individual chapters are defined in each chapter.
One example of a common definition is “customs duty”, which is defined as “a customs or import duty and a charge of any kind imposed on, or in connection with, the importation of a good, including a form of surtax or surcharge in connection with that importation”, along with several clarifying exclusions of other permitted charges such as a sales tax applied in the same fashion as to domestic goods. An example of a country-specific definition would be the “geographical scope of application”, which sets out the territory of each Party covered by the Agreement. For Canada, the definition establishes that CETA applies to the Canadian land territory, air space, internal waters and territorial sea, the Canadian exclusive economic zone, and the Canadian continental shelf. For the EU, the Agreement applies to those territories covered under the Treaty of the European Union.
The initial provisions section establishes the framework and objectives of the Agreement. This includes, for example, the Article on the Establishment of the Free Trade Area, which formally establishes the free trade agreement in general terms. In addition, the Relation to Other Agreements Article re-affirms the commitment of Canada and the EU to the WTO framework. And finally, in line with longstanding Canadian policy, the Article on Rights and Obligations Relating to Water explicitly declares that water in its natural state is not subject to the terms of the Agreement.
Amendments to Wine and Spirits Agreements
Under CETA, Canada and the EU agreed to a number of commitments that work to ensure both the continued strength of this important industry, and that it benefits from more liberalized trade. CETA’s wines and spirits provisions set out in an Annex to the Initial Provisions Chapter, incorporate and build on the 2003 Canada-EU Agreement on Wines and Spirits. That agreement set out a number of commitments between Canada and the EU structured mainly around the principles of national treatment and non-discrimination, i.e. that the Parties would treat each other’s products similar to their domestic counterparts.
CETA reaffirms the national treatment and non-discrimination commitments of the 2003 Agreement, while also maintaining a number of exceptions that reflect the unique character of the sale of wines and spirits in Canada. Specifically, Canadian wineries and distilleries retain the authority to sell only their own products on-site; Ontario and British Columbia are allowed to continue operating stores that sell only their own products; and Quebec may also continue to require all wine sold in grocery and convenience stores to be bottled in-province. Liquor boards are also required to not use the monopoly position they hold in their home jurisdiction to engage in activities that have an anti-competitive effect in other markets.
Pricing provisions of the agreement also commit the Parties to non-discriminatory prices and increased transparency for Canadian and European liquor boards, including with respect to handling charges for imported products. This helps simplify the export of Canadian wines and spirits to the EU.
Finally, the agreement eliminates the Canadian requirement that imported spirits from the EU bottled in Canada contain some portion of domestically produced alcohol. This reform allows Canadian bottlers to select the most competitive blends for processing and sale to consumers.
2. National Treatment and Market Access for Goods
Comprehensive market access for goods is at the cornerstone of any free trade agreement. This access is achieved by a commitment of the signatory Parties to lower or eliminate tariffs, to not apply restrictions or prohibitions on the import or export of goods, and to treat imported products no less favorably than similar goods produced domestically. Such commitments are contained in the CETA National Treatment and Market Access for Goods (NTMA) chapter.
CETA expands market access for Canada and the EU through comprehensive tariff elimination across all sectors of the economy. Under CETA, 98 percent of Canada’s and the EU’s tariff lines are duty-free for originating goods traded between Canada and the EU. Tariffs on an additional 1 percent of tariff lines will be eliminated gradually within 3, 5 or 7 years.
National treatment is the obligation for a Party to treat imported and domestic goods equally. This means that a good imported from the other Party cannot be subject to more burdensome conditions such as higher taxes, stricter product regulation, or restrictions on its sale than for a similar domestic good. Consistent with the multilateral trade rules of the World Trade Organization (WTO), national treatment under CETA applies once a good has entered the market of a Party.
Reduction and Elimination of Customs Duties on Imports
Under CETA, Canada and the EU have committed to eliminate or reduce tariffs on goods imported from the other Party, provided they qualify as originating under the CETA Rules of Origin Protocol. Tariffs will be eliminated within specified periods, primarily through the following four phase-out categories:
- Immediately upon entry into force of the Agreement (category A)
- over 3 years through 4 equal cuts (category B)
- over 5 years through 6 equal cuts (category C)
- over 7 years through 8 equal cuts (category D)
Goods that are excluded from commitments by a Party to provide tariff preferences are denoted in category E.
CETA also provides preferential market access through the establishment of various tariff rate quotas (TRQs). TRQs provide for involve the application of a preferential tariff rate for a defined quantity of imports, and a higher tariff rate applied for imports above that quantity.
Snapshot: Fish and Seafood
All EU fish and seafood tariffs are eliminated under CETA. For Canadian producers, this means duty-free access on 96% of EU tariff lines immediately when CETA entered into force. The EU will phase out tariffs on the remaining 4% of tariff lines over the next 3 to 7 years.
|Product:||EU Tariff before CETA:||Tariff Elimination Period|
|Salmon||Up to 15%||Immediate|
|Scallops, frozen, live, fresh or chilled||8%||Immediate|
|Shrimp, prepared or preserved in packages less than 2 kg||20%||Immediate|
|Crab, fresh/frozen||7.5%||Immediate/3 years|
|Lobster, frozen||6-16%||3 years|
|Lobster, processed||20%||5 years|
|Cod, frozen fillets||7.5%||7 years (duty-free access under TRQ during elimination period)|
|Shrimp, prepared or preserved in airtight packages or in packages over 2 kg||20%||7 years (duty-free access under TRQ during elimination period)|
Prior to CETA, frozen cod fillets and prepared and preserved shrimp were eligible for duty-free access under the EU’s autonomous TRQs if they were intended to undergo certain processing operations in the EU. Under transitional TRQs under CETA, duty-free access for 23,000 tonnes (shrimp) and 1,000 tonnes (cod) are available annually, with tariffs on volumes in excess of those quantities phased out over seven years. The processing requirements do not apply for imports into the EU within the CETA TRQs.
Under CETA, processing requirements for Canadian fish and seafood prior to export to the EU are also not applied. Newfoundland and Labrador’s processing requirements can however be applied during a three-year transition period.
The CETA rules of origin specify that fish and seafood caught by Canadian or EU fishing fleets qualify for preferential tariff treatment under the agreement. For certain fish and seafood products that are processed in Canada using imported materials (such as processed lobster, shrimp, salmon, and sardines), alternative rules of origin are set out in Annex 5-A: Origin Quotas and Alternatives to the Product-Specific Rules of Origin in Annex 5. Exports under these rules of origin are subject to annual quotas, which may be increased by 10% per year for the first four years after the implementation of the Agreement under certain conditions.
Restrictions on duty drawback, duty deferral and duty suspension programs
Beginning three years after the entry into force of CETA, a Party will not be allowed to refund, defer or suspend custom duties on inputs imported from a non-Party on the condition that they will be incorporated into goods exported to the other Party under CETA. This ensures that Canada and the EU cannot indirectly support their exports to each other by providing tariff relief on input products imported from a non-party and used in the production of goods for exports.
Duties, taxes or other fees and charges on exports
CETA prohibits duties, taxes or other fees and charges on exports to the other Party that are in excess of those that would apply to a good if they were sold domestically.
The Parties commit not to increase their tariffs on imports from the other Party that meet the rules of origin beyond the rates that formed the basis of tariff negotiations in this agreement except:
- for goods not claiming CETA tariff preferences;
- when there has been a unilateral reduction beyond what is provided under CETA, in which case it may increase back to rates set out in CETA;
- as otherwise authorized by CETA or any agreement under the WTO.
This provision provides certainty to traders that tariffs on qualifying imports from the other Party will not increase.
Temporary Suspension of Preferential Tariff Treatment
Subject to a consultation process, a Party may suspend tariff preferences for a period of up to 90 days in respect of a good exported by a person of the other Party where:
- (a) breaches of customs legislation have been committed by that person in respect of that good or;
- (b) the other Party has systematically and unjustifiably refused to cooperate with that Party in order to enable investigations of breaches of customs legislation by that person in respect of that good.
A suspension of tariff preference may be renewed if the conditions giving rise to the initial suspension still exist.
To ensure that the provision is used in an appropriate way, any such suspensions are preceded by consultations between customs authorities and at the committee level with a view to agree to a mutually acceptable resolution of the matter.
Fees and other charges
CETA prohibits the imposition of fees and other charges by a Party in connection with the import from or export of goods to the other Party, unless the fee or charge is commensurate with the cost of service provided. This prevents a Party from using such fees or charges as an indirect barrier to trade, and thus ensures that the tariff elimination outcomes that have been negotiated are not undermined. An example of a permissible fee would be one for conducting an inspection of imports before they are cleared to enter the market; in this case, a Party may charge a fee that reflects the cost of actually carrying out that inspection.
Goods Re-entered after Repair or Alteration
A good of a Party, regardless of its origin, can re-enter that Party on a duty-free basis after having been exported to the other Party for repair or alteration. However, for ships, boats and floating structures that re-enter Canada, the value of the repair or alteration to these goods is subject to customs duties as per Canada’s tariff schedule.
Import and export controls
Beyond tariffs, a Party may not maintain or adopt prohibitions or restrictions on the import or export of any good from/to the other Party, except where identified in the text. Some restrictions are allowed in specific circumstances. These include situations of short supply, conservation of natural resources where domestic consumption or production is also restrained, and restrictions imposed in conjunction with domestic price stabilization schemes.
Also, to the extent that a Party maintains an import or export prohibition or restriction in respect of a good (e.g. dangerous materials) of a non-Party, that Party may continue to do so. This includes cases where a Party restricts or prohibits imports of goods of the non-Party that have arrived via the other Party, as well as exports intended for a non-Party that would have been shipped indirectly through the other Party.
For Canada, the provisions on import and export controls under CETA do not apply to measures concerning:
- the export of logs;
- the export of unprocessed fish from Newfoundland and Labrador for a period of 3 years following the entry-into-force of CETA;
- Canadian excise duties on absolute alcohol; and
- the importation of used vehicles that do not meet Canada’s safety and environmental requirements
Other Provisions related to trade in goods
Under CETA, each Party will endeavor to ensure that a good from the other Party that is sold in one place in that Party may be sold throughout its territory. This provision is designed to facilitate the sale of goods throughout the free trade area created by CETA, while also supporting one of the fundamental principles behind the creation of the EU common market.
Committee on Trade in Goods
CETA establishes a committee to address, at the request of either Party, all issues pertaining to trade in goods, including issues arising in the implementation and application of CETA. A separate committee is also established to deal specifically with issues related to agricultural goods.
CETA improves Canada’s agricultural market access to the EU through tariff elimination for most agricultural exports, and through the establishment of tariff rate quotas for others. The agreement also establishes institutional mechanisms to address issues of key importance to agricultural producers, processors and exporters, and to promote cooperation between both regulators and scientists. In addition, it provides an opportunity to discuss and address non-tariff barriers to trade for agricultural exports. This includes a mechanism on biotechnology that increases cooperation and exchange of information between Canada and the EU, with a view to minimizing adverse trade impacts.
Most agriculture-related provisions of CETA are set out in four specific chapters: National Treatment and Market Access, Rules of Origin, Subsidies, Sanitary and Phytosanitary Measures.
National Treatment and Market Access (NTMA)
Under the tariff elimination provisions of the NTMA Chapter, EU tariffs on over 95% of its agricultural tariff lines will be duty-free once the CETA is fully implemented. EU tariffs became eliminated upon CETA’s entry into force for almost 94% of agricultural tariff lines, while others will be eliminated in stages through transitions periods of 3 to 7 years, depending on the tariff line.
|Product:||EU Tariff before CETA|
|Fresh Cherries||Up to 12% (seasonal)|
|Fresh Apples||Up to 9% (seasonal)|
|Frozen potato products, incl. French fries||14.4% to 17.6%|
|Sweetened, Dried Cranberries||17.6%|
|Cat and Dog Food||Up to € 948 /tonne|
|Oils (for example, Canola and Soybean Oils)||3.2% to 9.6%|
|Processed Pulses (for example, Flour, Meal and Powder)||7.7%|
|Processed grains (for example, Wheat flour||€ 172/tonne|
|Baked Goods, such as breads, pastries, cakes||From 9%|
|Dairy (for example, HS Chapter 4 products)||Up to € 2313/tonne|
|Product:||EU Tariff before CETA|
|Durum wheat||Up to €148 /tonne|
|Common wheat||Up to €95 /tonneFootnote *|
|Rye||Up to €93 /tonne|
|Barley||Up to €93 /tonne|
|Oats||Up to €89 /tonne|
|Starches, including wheat starch||Up to €224 /tonne|
|Sweetcorn, frozen||5.1% + € 94/tonneFootnote *|
The NTMA chapter also provides for the establishment by the EU of duty-free tariff-rate quotas for specified Canadian agricultural exports:
|Product:||Tariff-rate quotas established under CETA:|
|High Quality BeefFootnote */Bison (i.e. “Hilton” quota, shared with the US)|
Existing 14,950 tonnes carcass weight/11,500 product weight quota
|Fresh/Chilled Beef and VealFootnote * :|
35,000 tonnes carcass weight
|Frozen/Other Beef and Veal;Footnote *:|
15,000 tonnes carcass weight
3,000 tonnes carcass weight
|Fresh/Frozen PorkFootnote *|
80,549 tonnes carcass weight
|Sweet Corn, prepared/preserved; including frozen sweetcorn during its phase-out period.|
|Common Wheat, transitional TRQ during its phase-out period.|
The NTMA Chapter provides for the establishment by Canada of a 16,000 tonne tariff-rate quota for EU cheese imports and a 1,700 tonne tariff-rate quota for industrial-use, originating from the EU. It also provides for the elimination of Canada’s milk protein substances tariff on entry into force. There is no additional access provided for any other Canadian supply managed product (other dairy, poultry and eggs).
Canada and the EU have developed certain principles for their respective administration of the tariff rate quotas. Canada also maintained its right to use special safeguards on over-quota supply managed goods. Canada reallocated to the EU 800 tonnes from the existing WTO cheese tariff-rate quota to take into account successive enlargements of the EU.
Rules of Origin
Agriculture and agri-food products must satisfy the CETA rules of origin in order to benefit from the preferential market access under CETA. The CETA rules of origin also allow preferential duty-free access for Canadian exports of certain processed agricultural products that are produced using a higher percentage of non-originating materials or ingredients than would otherwise be allowed, subject to an annual quota volume. These more liberal rules of origin will benefit producers of products that contain imported ingredients, such as certain grains (e.g. rice) imported into Canada.
|High-Sugar Containing Products (including flavoured drink mixes, iced-tea mixes, instant hot chocolate, and instant coffee)||30,000 tonnes (with conditional growth towards 51,540 tonnes over 15 years)|
|Sugar Confectionery and Chocolate Preparations (including bubble and chewing gum, sugar candies, chocolates and cocoa preparations)||10,000 tonnes|
|Processed foods (including baked goods, breakfast cereals, mixes and doughs, rice pasta, cranberry and blueberry juice, and certain jellies)||35,000 tonnes|
|Dog and cat food||60,000 tonnes|
The Subsidies Chapter includes a provision which provides for the prohibition of export subsidies for agricultural products exported by either Canada or the EU. This commitment is conditional upon tariffs being fully eliminated for these products. The chapter also establishes a consultative mechanism on all forms of government support for agricultural products.
Sanitary and Phytosanitary Measures (SPS)
The SPS Chapter sets out a number of provisions designed to facilitate trade and cooperation between Canada and the EU with respect to measures that may have an impact on trade in agricultural, fish and forestry products. For more information on the SPS Chapter (chapter 5), see the CETA SPS Chapter Summary below.
In parallel to the negotiation of the SPS chapter, Canada and the EU exchanged letters designed to address specific issues related to market access for red meat. In Fall 2015, the EU approved the use of recycled hot water as a carcass decontamination technique, a technique commonly used by Canadian industry but which had not been approved for use in the EU. In Spring 2016, the EU recognized that significant elements of the Canadian meat inspection system were equivalent to its own, thus allowing for immediate removal of a number of certification requirements that previously had to be met by Canadian exporters.
Committees have been established under CETA to address issues that impact trade under various chapters of the CETA. For example, the Committee on Agriculture, established under the Committee on Trade in Goods, will operate as a forum where issues related to agricultural goods can be raised as they arise so Canada and the EU can work to address them as soon as possible. The Committee can make non-binding recommendations to the CETA Joint Committee, which may then adopt the recommendations as appropriate.
The SPS Joint Management Committee performs an equivalent role in addressing SPS measures.
Protocol I: Rules of Origin and Origin Procedures
Section 1: Rules of Origin
In a globalized world with complex supply chains, it may be difficult to determine where a product originates. For the purposes of CETA, however, it is essential that a product’s originating status be clearly defined, so that the benefits of preferential tariff treatment accrue only to traders from Canada or the EU. This is the primary purpose of the CETA Protocol on Rules of Origin and Origin Procedures. Generally speaking, a product must have undergone sufficient production in either Canada or the EU to be deemed originating for the purposes of the agreement.
Canada and the EU have agreed to rules of origin that reflect their respective production and sourcing patterns. For Canada, this means that the agreed outcomes generally reflect the integrated nature of the North American economy.
CETA’s overall approach to rules of origin echoes Canada’s past FTAs. The Protocol sets out the general rules that determine sufficient production, supplemented by an annex listing product-specific rules of origin (PSROs). Consistent with Canada’s other FTAs, the CETA PSROs are generally written in a tariff-shift format and include “focused value” PSROs for several products, whereby only the value of specific, key non-originating components is considered when determining the originating status of the finished product. This contrasts with the “regional value content” approach, used in some of Canada’s earlier agreements, which requires producers to take the value of all non-originating parts and materials into consideration when determining origin. Use of the focused value approach benefits traders by minimizing the number of materials that must be tracked for origin purposes, thereby reducing the administrative burden of claims for preferential treatment, and ultimately facilitating trade.
Product Specific Rules of Origin
The PSRO Annex sets out rules for products containing imported materials or parts. In some cases, these rules specify a maximum percentage of the product’s total value that can be derived from sources other than Canada or the EU. In other cases, PSROs are based on whether the finished product is classified in the Harmonized System Footnote 1 differently than its materials (also known as a tariff-shift PSRO). In other words, if a product has been substantially transformed within either Canada or the EU, such that when the materials used in production and the finished product are classified differently in the Harmonized System, the finished product may be considered originating.
CETA also includes origin quotas, which provide for more liberal rules of origin for certain products, subject to annual quantitative limits. This provides producers of specified fish and seafood products, textiles and apparel, passenger vehicles, and certain processed agricultural products with an opportunity to export preferentially under CETA when the products do not satisfy the main rules of origin.
Trade in Automobiles
The main CETA rule of origin for automobiles requires that they have 50% originating content in order to qualify for preferential treatment. This threshold will be raised to 55% after 7 years. Unlimited quantities of Canadian automobiles can be exported to the EU on a preferential basis under this rule. Reflecting the integrated nature of the auto sector in North America, the CETA rules of origin also allow up to 100,000 autos per year containing up to 70% of their value (or 80% of their cost) to be comprised of non-Canadian components and still be eligible for preferential EU tariff treatment. In addition, the Agreement includes a clause that states that if the US and the EU reach their own free trade agreement , US auto parts used in a Canadian vehicle that is exported to the EU can be considered to have originated in Canada, subject to certain conditions.
CETA also includes comprehensive tariff elimination on autos. Under the National Treatment and Market Access for Goods chapter, both the EU and Canada will eliminate tariffs on all motor vehicle products within 7 years following CETA’s entry into force. Tariffs on automobiles are eliminated over this period, with shorter periods for other products. Tariffs on buses, for example, are eliminated over a period of up to 5 years, while tariffs on trucks and other vehicles will be eliminated within 3 years. Tariffs are eliminated immediately upon entry into force of CETA for motor vehicle parts.
The third area of the agreement affecting autos relates to cooperation on auto standards and motor vehicle regulation. The Annex on Cooperation in the Field of Motor Vehicle Regulations under the Chapter includes a listing of 17 United Nations Economic Commission for Europe (UN ECE) safety standards that, by the Agreement’s coming into force, Canada has incorporated, in whole or in part, as allowable alternatives within its safety standards. These UN ECE standards do not compromise the safety or integration of the North American auto manufacturing market. The Parties also agreed to a work plan that will see Canada evaluate a number of additional UN ECE standards to determine whether it can incorporate them into Canadian regulations as allowable options within existing Canadian standards.
Also under the Annex on Cooperation in the Field of Motor Vehicles Regulations, Canada and the EU have agreed to more cooperation and information sharing with a view to supporting the development of global auto safety regulations and exploring possible future harmonization between the two Parties. Additional cooperative activities may include joint efforts to promote greater international harmonization, and joint analysis relating to current motor vehicle technical regulations.
Cumulation of Origin
The CETA Rules of Origin recognize and encourage production that occurs in both Canada and the EU. The relevant provisions specify that a product that originates in one Party is considered to originate in the other Party when used as a material in the production of a subsequent product there.
Provisions on cross-cumulation are also included in this chapter. This means that materials sourced from a country with which both Canada and the EU have an FTA may be considered toward the originating status of products traded under CETA. This provision is subject to future agreement between Canada and the EU on specific conditions.
Wholly Obtained Products
Products that wholly originate in the territory of a Party are eligible for preferential market access under CETA. These include harvested fruits, vegetables and grains; extracted minerals; and fish caught within Canadian or EU territorial waters.
The tolerance provision specifies that a minimal amount of non-originating material may be used in production without affecting the originating status of a product. For example, if the rule of origin for wooden chairs does not allow for the use of non-originating wood, some non-originating wood may nonetheless be used, provided that its value is less than 10% of the value of the chair.
The CETA rules of origin establish that certain operations, such as washing, cleaning, packaging, sharpening and sorting, are insufficient to confer origin on a product, irrespective of whether it satisfies the applicable PSRO.
Accounting Segregation of Fungible Materials or Products
Fungible products have essentially identical characteristics and can therefore be intermingled (e.g. crude oils). Reflecting common business practices, CETA allows exporters of products containing fungible materials to use an inventory management system in their claims for preferential treatment. Without this provision, producers would be required to physically segregate originating and non-originating materials or products if they intended to take advantage of CETA.
Other Rules of Origin Provisions
The chapter includes other articles that aim to facilitate Canada-EU trade by simplifying the process of determining origin status. For example, materials such as those used to pack products for transport (e.g. pallets or containers) or neutral materials (e.g. energy) need not be taken into consideration when determining if a product meets the CETA rules of origin. The article on Through a Third Country details the conditions that must be met when originating products are being transported between Canada and the EU.
Section 2: Origin Procedures
Canada’s experiences with previous FTAs, notably NAFTA, have led to an understanding that procedures for interpreting, administering, and enforcing rules of origin must be set out in a manner that promotes their consistent and transparent application. These procedures are used to ensure that the preferential tariff treatment under the agreement only applies to goods that meet the CETA rules of origin. At the same time, procedures created to ensure compliance with the Agreement should not be overly burdensome or costly on traders, nor unnecessarily impede the flow of goods. The CETA Origin Procedures Chapter creates a framework that achieves an appropriate balance between these objectives.
CETA’s Origin Procedures establish common approaches for importers, exporters, and customs authorities with regard to areas such as certification of origin, record keeping, and origin verification. Accordingly, the chapter clarifies the processes necessary for importers and exporters to take full advantage of the Agreement, while at the same time providing customs authorities with an applicable methodology to ensure that only qualifying goods enjoy the benefits of CETA.
Certification of origin
The certification of origin is referred to as an origin declaration. The origin declaration is completed by the exporter to enable the importer to claim preferential tariff treatment under CETA. The origin declaration is a simple statement on an invoice indicating that the good meets the rule of origin.
The chapter specifies the responsibilities of an exporter with regard to completing an origin declaration. The exporter must submit, at the request of its own country’s customs authority, an origin declaration together with all other documents that demonstrate that the good meets the rule of origin.
CETA authorizes customs authorities to allow an origin declaration to apply to multiple shipments of an identical product for a period up to 12 months. The exporter is also obligated to notify the importer of any incorrect information contained within an origin declaration.
In order for an importer to claim preferential tariff treatment, it must provide the exporter’s origin declaration to their customs authority, upon request. An importer is also required to inform its customs authority of an incorrect origin declaration and pay any duties owing.
In cases where the importer did not have an origin declaration at the time of import, the chapter allows for refund of excess duties paid, within a specified time period.
Importers may be requested to provide documentation that demonstrates that the good, while en-route to Canada or the EU, remained under the customs control of any country not party to the Agreement.
The record keeping provisions of the chapter set out that importers, exporters and producers are required to maintain records that support the originating status of the good for which an origin declaration was completed.
The Protocol also sets out a process for a customs authority to determine whether a good meets the rule of origin and is entitled to preferential tariff treatment. This involves a request by the importing customs authority to the exporting customs authority to conduct an origin verification. The customs authority of the exporting country has 12 months to conduct the verification and provide a written report and any required supporting documentation to the customs authority of the country of import. Based on that information, the customs authority of the country of import will make a decision as to whether the good meets the rule of origin and is entitled to the preferential tariff treatment.
To facilitate the application of the origin procedures and support trade expansion, CETA provides firms with the opportunity to seek advance rulings from customs authorities with respect to the origin of goods.
Any person that receives an origin decision or an advance ruling will be allowed access to at least two levels of appeal.
Any information gathered pursuant to the administration of the Chapter must conform to confidentiality standards under the domestic laws of the Parties. This information cannot be used for purposes other than the administration and enforcement of the origin procedures, except with the explicit permission of the provider of the confidential information.
3. Trade Remedies
Countries use trade remedies to protect their industries from unfair, trade distorting practices of other trading partners and from surges in imports that cause harm to domestic producers. There are three main types of trade remedies:
- Anti-dumping – duties imposed when exporters sell goods to importers at a lower price than the domestic price, or at unprofitable prices
- Countervailing – duties imposed to protect domestic producers from subsidy-aided foreign exports
- Safeguards – temporary duties applied in response to sudden increases of imports in a specific sector.
The Trade Remedies chapter’s provisions accomplish three main objectives: ensuring that trade remedies are applied transparently, ensuring due consideration of public interest in imposing anti-dumping or countervailing duties, and ensuring that safeguards are applied in the least trade distorting manner possible. Canada has long held the view that trade remedies should be applied consistently from country to country, and that the multilateral framework of the WTO is therefore best suited to develop trade remedy disciplines. Accordingly, the Trade Remedies chapter of CETA is structured mainly as a reaffirmation of the rights and obligations of Canada and the EU with respect to WTO trade remedies agreements.
Anti-Dumping and Countervailing Transparency
Under the Trade Remedies Chapter, Canada and the EU commit to disclosing all the key facts that form the basis for a decision to impose an anti-dumping or countervailing measure.
Consideration of Public Interest
The Chapter also requires that relevant authorities consider, in accordance with their domestic law, the public interest of imposing an anti-dumping or countervailing duty. After considering the public interest, Parties may apply a level of duty lower than the full amount of dumping or subsidy.
The Safeguard Transparency Article requires that a Party initiating a safeguard investigation provide a public version of the complaint filed by their domestic industry, as well as a public report of findings and conclusions on all pertinent issues of fact and law considered in the investigation. The initiating Party must also offer to hold informal consultations with the other Party to review this information.
Imposition of Definitive Measures
If a safeguard is ultimately imposed, CETA requires the Parties to try to impose the safeguard in the way that least affects trade between Canada and the EU. The initiating Party must offer to take part in informal consultations with the other Party to ensure this minimal affect.
4. Technical Barriers to Trade
Product standards and technical regulations are employed by regulators to ensure the protection of human, animal or plant life or health, and protection of the environment. For example, electrical equipment must conform to safety regulations in order to prevent the possibility of fire or electric shock. However, as tariffs are eliminated, there is the potential that trading partners could use technical requirements relating to products as a means of blocking imports. These requirements are known as “technical barriers to trade” (TBT).
Under the WTO Agreement on Technical Barriers to Trade (WTO TBT Agreement), Canada and the EU have already made a number of commitments with respect to the preparation, adoption and application of technical regulations, standards, and conformity assessment procedures, to avoid implementing measures that act as unnecessary obstacles to international trade. The TBT chapter of CETA incorporates and builds on the key provisions of the WTO TBT Agreement and sets out provisions that help prevent and address disruptions created by regulations and associated testing or certification requirements in Canada and the EU.
In effect, the TBT chapter helps to secure the market access gains made in other parts of CETA. TBT chapter provisions ensure that technical regulations and standards are applied equally to products and goods originating in both Canada and the EU. Where differences in regulations or standards arise, the provisions of the TBT chapter seek to promote convergence of our respective practices where possible, while protecting each Party’s right to regulate in its own best interests. Participation of the parties is voluntary. Nothing in the TBT chapter forces Canada or the EU to lower their safety standards and regulations.
The Chapter also contains transparency provisions in the form of notification and information exchange requirements designed to ensure that the Parties are notified at an early stage of upcoming regulatory changes. This process creates transparency in the regulatory process and enables Canada and the EU to comment on each other’s proposed regulatory changes before the proposals come into effect. It also helps businesses comply with new or amended requirements with minimal disruption to trade. These provisions work in concert with cooperation provisions designed to encourage the Parties to work together and exchange information on regulatory initiatives and enforcement. Neither the EU nor Canada have decision-making power over the legislation of the other; it remains an internal procedure to the Party. Rather, the Chapter ensures that partners are made aware of potential changes to the legislation in order to avoid unforeseen trade barriers.
Canada has included a chapter on Technical Barriers to Trade in all of its recent FTA negotiations. However, CETA is the first to incorporate the key provisions of the WTO TBT Agreement and make them enforceable bilaterally. Incorporation effectively streamlines and speeds up the dispute settlement process, thereby minimizing trade disruptions.
Technical regulations are mandatory rules set by governments which govern the characteristics or related processes of products, their production methods and labelling. Technical regulations can sometimes be based on standards, which are similar to regulations but can be created by standards bodies, organizations, industry or governments and are non-mandatory.
International standards can be useful mechanisms to encourage convergence of standards and regulations between trading partners, thereby facilitating trade. One example of international standards helping to facilitate trade would be the case of electrical plugs and sockets. International harmonization of plug and socket sizes and shapes has helped to encourage trade in electrical devices without the need to redesign products for every market.
Conformity assessment refers to any procedure used to determine that relevant requirements in technical regulations or standards are met. Product testing and certification is often a key component of conformity assessment. If a product has been certified by conformity assessment body to meet a particular regulation or standard, it typically bears the mark of the certification body that did the assessment.
Incorporation of the WTO Agreement on Technical Barriers to Trade
CETA incorporates key provisions from the WTO TBT Agreement, meaning that a violation of those commitments can be settled in the more efficient bilateral dispute mechanism of CETA. Recourse to dispute settlement creates an incentive to ensure technical regulations do not block imports from the other Party.
The TBT chapter includes a commitment to encourage cooperation in technical regulations, standards, conformity assessment, market surveillance, enforcement activities, and related areas with a view to promoting convergence between Canada and the EU. This includes the encouragement of a free exchange of information on technical regulations and standards so that, where possible, either Party may propose that the other recognize a given technical regulation as equivalent to its own.
CETA further encourages the Parties to voluntarily promote transparency and openness in the development of new technical regulations and standards, and to consider the views and concerns of the other Party early in the regulatory development process.
The Parties commit to observing the CETA Protocol on the Mutual Acceptance of the Results of Conformity Assessment and Protocol on Good Manufacturing Practices for Pharmaceuticals. These Protocols reduce regulatory burden by eliminating duplicative certification requirements, allowing Canadian exporters meet EU requirements faster and in a more cost-effective manner. Additional information on the Protocols can be found in sections 32 and 33 of this guide.
The Parties continue to be bound by transparency obligations through incorporated provisions from the WTO TBT agreement, and active participation in the committee responsible for the TBT chapter or working groups created under CETA. The Parties therefore have an enhanced notification and information exchange mechanism which allows more time to adapt to new regulatory requirements. The transparency provisions of the CETA TBT Chapter allow interested persons from Canada or the EU to participate in the development of the other Party's technical regulations on the same terms as people in the other Party.
Management of the Technical Barriers to Trade Chapter
The Committee on Trade in Goods addresses matters arising in the area of technical barriers to trade and the Protocol on the Mutual Acceptance of the Results of Conformity Assessment.
The Committee structure includes clear points of contact that are responsible for addressing concerns of the other Party and facilitating the smooth implementation of TBT Chapter.
5. Sanitary and Phytosanitary Measures
CETA’s Chapter on Sanitary and Phytosanitary Measures (SPS) affirms and builds upon the World Trade Organization (WTO) Agreement on the Application of Sanitary and Phytosanitary Measures. The Chapter maintains each Party’s right to take the SPS measures necessary to protect against risks to food safety, animal or plant life or health, while requiring that such measures be science-based, transparent, and applied only to the extent necessary to protect human, animal or plant life, so as not to create unnecessary and unjustifiable SPS-related trade restrictions.
The Chapter incorporates and updates the existing 1998 Canada-EU Veterinary Agreement which currently applies to the trade in animal and animal products. Moreover, the Chapter builds on the provisions of the 1998 Veterinary Agreement to establish a framework for cooperation on the full scope of SPS measures - food safety, animal health, and plant health. In this regard, the Chapter contains detailed provisions with respect to regionalization, equivalence, trade conditions, audit and verification, export certification, import checks and fees, notification and information exchange, emergency SPS measures, and the establishment of a Joint Management Committee for Sanitary and Phytosanitary Measures. The Chapter also incorporates, updates, and expands upon Annexes contained in the 1998 Veterinary Agreement, which establish the technical framework for the recognition of equivalence of SPS measures maintained by the two Parties to facilitate trade that is consistent with protection of human, animal and plant life and health. On the date of entry of CETA, the 1998 Veterinary Agreement was terminated and replaced by the CETA SPS Chapter. Recognition of equivalence of SPS measures could save time and money for Canadian and EU producers and exporters of high-quality agriculture, agri-food, fish and seafood, and forestry products.
SPS Joint Management Committee
The Joint Management Committee for Sanitary and Phytosanitary Measures, comprised of regulatory and trade representatives of each Party responsible for SPS measures, monitors the implementation of the SPS Chapter, provides a regular forum to exchange information, and reviews the Chapter’s various annexes. The Committee may decide to amend those annexes following its review. The Committee also serves as a forum for the regular exchange of information concerning Canada’s and the EU’s respective regulatory systems with a view to avoiding or resolving SPS issues, and promotes cooperation between Canada and the EU on SPS issues being discussed at the multilateral level.
Adaption to Regional Conditions
The Adaptation to Regional Conditions article provides for the recognition of distinct regional conditions in cases of a pest or disease outbreak in Canada or the EU. As a result, import restrictions can be limited to products from specific regions affected by certain pest or disease outbreaks, rather than the entire territory of the exporting Party.
The article does not stop the EU and Canada from using additional measures to maintain appropriate levels of protection for their populations, and applies only to diseases listed in the Chapter’s Regional Conditions Annex.
The Equivalence article establishes a framework for Canada and the EU to recognize each other’s SPS measures as equivalent. The exporting Party must objectively demonstrate that its measures achieve the importing Party’s level of protection. The Guidelines to Determine, Recognise and Maintain Equivalence Annex sets out the principles to govern this determination of equivalence, and specific measures, once recognized, are set out in the Recognition of SPS Measures Annex.
Import Checks and Fees
The Import Checks and Fees article requires that an importing Party must, whenever possible, notify the import (or its representative) of the reason for non-compliance and provide them with an opportunity for a review of the decision. In addition, the article requires that the action taken by an importing Party in the case of a non-compliance not be unduly trade-restrictive. The specific guidelines for import checks and fees can be found in the Checks and Fees Annex.
Notification and Information Exchange
The Notification and Information Exchange article requires that Canada and the EU notify each other as quickly as possible in certain cases which include a significant change to the status of a pest or disease, a finding of epidemiological importance concerning animal diseases, and significant food safety issues related to a product traded between the Parties. In addition, Parties will endeavor to exchange information on other relevant issues, such as changes to SPS measures or to the structure of the Parties’ relevant SPS authorities.
6. Customs and Trade Facilitation
Canada’s primary objective in negotiating the Customs and Trade Facilitation Chapter of CETA was to reduce transaction costs caused by customs processes. To this end, Canada sought commitments designed to improve the procedures governing the movement of goods across national borders so as to reduce cost burdens and maximise efficiency. This will be accomplished through the continued modernization, simplification and standardization of customs procedures.
The Customs and Trade Facilitation Chapter seeks to ensure that effective and efficient border measures expedite the movement of goods, while measures to ensure national safety and security are also maintained. The chapter complements similar commitments Canada and the EU have undertaken under the auspices of the World Trade Organization (WTO) and the World Customs Organization (WCO).
The Transparency article requires the Parties to electronically publish all regulations, policies, and requirements governing imports, exports, and customs matters in general, as well as changes to these regulations. This ensures that exporters and importers can easily access relevant regulations and more easily meet the Parties’ various import and export standards.
Release of Goods – Reform of Customs Procedures
Canada and the EU agree to allow goods to be released at the first point of arrival in the importing country. In addition, importers may remove goods from customs’ control before the payment of relevant duties and taxes. In these instances, customs retains the right to demand that the importer provide a guarantee of final payment in the form of a surety or deposit.
The Parties have also agreed to simplify the documentation required for entry of low-value goods through frameworks such as Canada’s Courier Low Value Shipment (CLVS) program.
Release of Goods – Technology and Coordination
Where no risk has been identified, the Parties will provide advance electronic submission and information processing services before the physical arrival of the imported goods, such as electronic forms for cargo reporting, release, and entry and accounting. The Parties also commit to work towards coordinating their different agencies to concentrate all import and export data and document requirements and verifications in a single location.
Fees and Charges
Each Party has agreed to publish, through electronic and non-electronic means, information on fees and charges imposed by their respective customs authorities.
The Risk Management Article endeavors to base the examination of goods by customs authorities on risk assessment principles by concentrating on high risk goods rather than examining each shipment presented for clearance. This commitment does not prevent either Canada or the EU from conducting more extensive quality control and compliance reviews.
Canada and the EU will make, wherever possible, import and export customs forms available electronically, and allow for the electronic submission of forms. The Parties will also work towards developing interconnected single window systems (which allow for exporters and importers to submit regulatory documents at a single location) and electronic systems which are interoperable between Canada and the EU.
Review and Appeal
Both Canada and the EU will ensure that all administrative actions and decisions made regarding the import of goods can be promptly reviewed by judicial, arbitral, or administrative tribunals or procedures. The Parties agree that these reviews will be conducted by officials or bodies independent of the authority that rendered the decision being reviewed.
Governments use subsidies to support firms and industries for a variety of reasons, including employment support, assistance to a struggling industry, or support for an innovative sector of the economy. Subsidized firms and industries can sometimes afford to offer lower prices for their products, affecting competition with other, unsubsidized firms. Because certain subsidies, such as those provided to specific businesses or industries (as opposed to generally-available subsidies), are potentially trade-distorting, governments have made commitments at the WTO to provide subsidies in a way that has the least possible impact on international trade.
Comprehensive commitments between Canada, the EU, and other trading partners are set out in the WTO Agreement on Subsidies and Countervailing Measures, and the WTO Agreement on Agriculture. Because subsidies have a potential impact on all trading partners, Canada believes that the WTO is the venue best suited to strengthen disciplines on their appropriate use. However, due to the exceptional importance of CETA to both Parties, however, Canada and the EU agreed to emphasize within the agreement certain WTO best practices concerning subsidies. Accordingly, CETA’s subsidies chapter generally reflects and reinforces the rights and obligations set out in the WTO Agreement on Subsidies and Countervailing Measures.
All subsidies provided within Canada, with the exception of those relating to cultural industries (see p.70-71 for more details), are subject to the subsidies chapter of CETA. Provisions covering exchange of information and notifications between the Parties will encourage enhanced transparency. Other provisions on informal consultations allow for discussion and action on any subsidy programs considered damaging to Canadian or EU interests.
The transparency article specifies that every two years both Canada and the EU will notify each other of any new or existing subsidies they provide. The Parties may either directly inform each other of the legal basis, form, and amount of the subsidy, or notify the WTO in order to meet the CETA commitment.
The Consultations article allows the Parties to request informal consultations if they feel they are being adversely affected by the other Party’s subsidies. During these informal consultations, the Parties may request information regarding any subsidy or government support. As a result of these consultations, the subsidizing party must try to eliminate or minimize the negative effects of the subsidy. This article is not subject to CETA’s Dispute Settlement chapter.
Consultations on Agricultural and Fisheries Subsidies
The fisheries and agriculture consultations article addresses Canada and the EU’s desire for enhanced multilateralism with regard to subsidy disciplines in these areas. Recognizing the difficulties encountered thus far with respect to advancing discussions at the WTO on fisheries subsidies disciplines, Canada and the EU have declared under CETA their objective to work together toward reaching an agreement to enhance multilateral rules in this area.
Agricultural Export Subsidies
The agricultural export subsidy article commits both the EU and Canada to eliminate export subsidies on any given agricultural product exported to the other Party if the importing Party has eliminated its tariff on that product. In instances where there are tariff rate quotas, the prohibition on export subsidies is conditional on a Party’s elimination of either the in- or the over-quota tariff.
Investments form a substantial portion of the Canada-EU economic relationship. Direct investments by Canadian companies in the EU totalled $232 billion in 2016, representing 22 percent of Canadian direct investments abroad. The same year, direct investments from European companies in Canada totalled $247 billion, representing 30 percent of total foreign investments in Canada.
Trade in investment is distinct from the trade in goods or in services, and operates under distinct rules. In recognition of this, CETA incorporates a dedicated chapter to facilitate increased investment between Canada and the EU. CETA’s Investment Chapter is designed to give investors greater certainty, stability, transparency, and protection for their investments, and to secure access for Canadian and European investors to each other’s respective markets.
As part of the legal review of CETA, Canada and the EU agreed to revisions to investment protection and investment dispute resolution provisions by including innovative and progressive approaches. Among those innovations, Canada and the EU have: strengthened governments’ right to regulate; moved to a permanent, transparent and institutionalized dispute-settlement tribunal; revised the process for the selection of tribunal members; set out additional ethical requirements for tribunal members; and agreed to an appeal system. These reflect our joint desire to enhance investment protection and investment dispute resolution, and to continue working together toward a more robust and transparent system that responds to the concerns of Canadian and EU citizens and businesses.
The investment chapter is divided in sections corresponding to different types of provisions. The Establishment of investments section prohibits Canada and the EU from applying undue restrictions on the entry into their markets of new investments. The non-discriminatory section requires Canada and the EU to treat each other’s investors no less favorably than they treat to any other investor in their territory. The Investment protection section protects investors from illegitimate government actions, such as denial of justice or of due process, or illegal expropriation. The Reservations and exceptions section codifies the ability of governments to act in the public interest when regulating in areas such as health, safety, and the environment, and other sensitive policy areas such as aboriginal affairs. Finally, the Resolution of investment disputes between investors and States section establishes an enforcement mechanism that includes mediation and consultation, and by which investment disputes can be resolved in a transparent and fair manner.
The Scope article establishes that the disciplines of the Investment Chapter apply to EU measures in relation to Canadian investors and their investments in the EU, and vice versa. The scope and architecture of the Investment Chapter have been modified compared to Canada’s previous trade and investment agreements to, among others, more clearly delineate the obligations that are subject to the resolution of investment disputes between investors and States.
Establishment of investments - Market access
The Market Access article prohibits the Parties from imposing certain quantitative restrictions that may inhibit the ability of an investor to establish an investment. Specifically, measures may not be adopted or maintained that restrict: the number of enterprises that may carry out an economic activity; the total value of transactions or assets; the number of operations or the total quantity of output; or the number of individuals that may be employed in a particular sector. Additionally, the Market Access article includes disciplines on measures that restrict the forms of legal entity an enterprise may take, such as a requirement for a joint venture, or the participation of foreign equity.
Establishment of investments – Performance requirements
This article prohibits Canada and the EU from imposing certain trade distorting performance requirements such as requiring local content, or restricting the volume or value of an enterprise’s imports to the volume or value or its exports. Additionally, Canada and the EU are prohibited from imposing performance requirements, such as those listed above, as conditions for receiving subsidies or other government incentives.
Non-discriminatory treatment – National treatment
The National Treatment article requires the Parties to provide each other’s investors and their investments with treatment that is no less favourable than that granted to their domestic counterparts in like situations. This means that governments do not unfairly discriminate against foreign investors in the application of their laws and regulations.
Non-discriminatory treatment – Most-favoured-nation treatment (MFN)
The MFN article obliges the Parties to provide each other’s investors and their investments with treatment and protections no less favourable than those granted to investors from a third country in like situations. This ensures that Canadian investors can benefit from any preferable treatment that the EU would have granted to a third country investor.
Investor protection – Investment and regulatory measures
Among others, this article reaffirms the Parties’ right to regulate to achieve legitimate policy objectives, such as the protection of public health, safety and the environment.
Investor protection – Treatment of investors and of covered investments
This article obliges Parties to provide covered investments of the other Party treatment in accordance with the customary international law principles of fair and equitable treatment and full protection and security. The article sets out what constitutes a breach of fair and equitable treatment, including denial of justice, fundamental breaches of due process, manifest arbitrariness, targeted discrimination on manifestly wrongful grounds such as gender, race, and religious belief, and abusive treatment of investors.
Investor protection – Expropriation
The Expropriation article prohibits governments in either Party from nationalizing or expropriating investments, except when carried out for a public purpose, in accordance with due process of law, in a non-discriminatory manner and upon payment of prompt, adequate and effective compensation. This includes both direct and indirect expropriation. Direct expropriation refers to the seizure or forced transfer of title. Indirect expropriation refers to a government action that substantially deprives an investor of its property but without formal transfer of title or outright seizure.
Investor protection - Transfers
The Transfers article governs capital transfers by investors in and out of their host countries; it requires Parties to permit all transfers without restriction or delay and in a freely convertible currency. These transfers include:
- capital investments
- profits, dividends, interest, capital gains, royalties, management fees, and other forms of returns derived from investments
- proceeds from sale or liquidation
- contract payments
- compensation for losses and expropriation
- earnings of foreign personnel working in connection with an investment
This article also prohibits Canada and the EU from penalizing their respective investors for failing to transfer payments back to their home territories.
The Parties may still restrict transfers where required by their domestic law, such as in cases of bankruptcy, securities trading, criminal offences, and for record keeping purposes meant to assist legal or regulatory authorities, as long as such restrictions are applied in an equitable and non-discriminatory manner.
Reservations and exceptions
The Reservation and exceptions article enables the Parties to exclude measures from certain obligations of the investment chapter, as well as to maintain future policy flexibility in key areas.
As in all of its bilateral and regional trade agreements that cover investments, Canada pursued a “negative list” approach. This means that all sectors are covered by the obligations of the Agreement except when explicitly listed in the chapter’s two annexes, and therefore carved-out from the application of certain of the chapter’s obligations. Annex I lists specific measures that do not conform to some of the investment chapter obligations. Annex II sets out areas where the Parties preserve policy flexibility for existing and future measures that might not conform to the investment chapter obligations.
As set out in the two Annexes, Canada’s federal and provincial governments will maintain policy flexibility in key areas such as social services; cultural industries; rights or preferences given to socially disadvantaged peoples; aboriginal rights; fishing-related activities; public utilities; privatization of state enterprises; subsidies; and government procurement. The EU has listed similar areas.
Canada also maintains the ability to review major acquisitions from investors from the European Union. Under CETA, the new threshold for EU-based companies will be $1.5 billion.
Snapshot: Investment Dispute Resolution
As part of the legal review, Canada and the EU agreed to make modifications in order to reaffirm the governments’ right to regulate, and ensure greater transparency and accountability in the dispute resolution proceedings.
As in Canada’s other trade agreements, CETA sets out a mechanism for the resolution of investment disputes. The mechanism provides investors with recourse to compensation when there is evidence that the host state has breached its obligations, including those prohibiting discrimination or expropriation, and that the investor has suffer losses as a result. However, there are some substantial procedural differences between the mechanism established by CETA and those in Canada’s other agreements.
CETA reflects Canada’s experience with dispute resolution provisions in other free trade agreements. The use of domestic courts is now encouraged through a provision giving investors who wish to exhaust domestic remedies up to 10 years to submit a claim under CETA. The agreement also encourages mediation by suspending the clock when mediation is ongoing.
The Consultations article sets out the initial steps disputing parties must undertake before resorting to arbitration. Consultations occur between the investor and the respondent Party with a view to settling disputes instead of proceeding to arbitration. A request for consultations must generally be submitted no later than three years after the investor has acquired knowledge of the alleged breach of CETA obligations.
The Procedural and other requirements for the submission of a claim to the Tribunal article sets out the conditions an investor must satisfy before a claim is submitted to the Tribunal. These include the investor giving its consent to arbitration and allowing 180 days to pass from the time it requested consultations. The investor must also withdraw from any proceedings in other domestic or international courts or tribunals relating to the same measure, and waive its right to initiate such proceedings in the future.
The Submission of a claim to the Tribunal article establishes that only investors may submit a claim, either on their own behalf or on behalf of an enterprise they own or control. The article also specifies the arbitration rules that will govern the proceedings.
As set out in the Constitution of the Tribunal article, CETA departs from Canada’s typical practice of appointing arbitrators on an ad hoc basis, i.e. for the purpose of hearing a single claim. Under CETA, Canada and the EU appoint 15 Members to a permanent Tribunal: 5 nationals of Canada, 5 nationals of the EU’s member states, and 5 nationals of third countries. Cases are heard before divisions of the Tribunal, each comprising three Members randomly selected by the President of the Tribunal. The Members are generally appointed for a 5-year term and are paid a monthly retainer fee.
The CETA Tribunal may dismiss a claim in an expedited way – i.e. before the first session of the division hearing the claim – if the claim is found to be manifestly without legal merits. It may also dismiss a claim later in the proceedings if it has come to believe that, as a matter of law, the claim is not one for which an award in favor of the claimant may be made. In both scenarios, the tribunal is to assume the alleged facts to be true. Also, an investor who has submitted a claim and has been inactive for a period of six months is deemed to have withdrawn its claim from arbitration.
CETA incorporates provisions to ensure the integrity of arbitrators and transparency in proceedings. The Ethics article requires that arbitrators respect the International Bar Association Guidelines on Conflicts of Interest in International Arbitration, which sets out criteria for individuals nominated to the Tribunal and includes guidance on how arbitrators should act in particular situations. It also prohibits Members of the Tribunal from acting as counsel or as an expert or witness in any pending or new investment dispute under CETA or any other international agreement. Transparency provisions require all documents from dispute resolution proceedings to be made publicly available and hearings to be open to the public, subject to the protection of confidential information. CETA also recognizes the importance of weighing the views of interested parties and accordingly they are able to apply to make submissions to the Tribunal.
The Appellate Tribunal article, as its title indicates, establishes an Appellate Tribunal which may, on specific grounds, uphold, modify or reverse awards issued by the Tribunal. The Appellate Tribunal will, however, only be fully operational once the administrative and organizational matters regarding its functioning are set out by decision of the CETA Joint Committee.
CETA also includes forward-looking provisions that open the door to future improvements to the Chapter in light of experience and developments in other international fora and under other international agreements. There is similarly forward-looking text that compels Canada and the EU to work towards a multilateral investment tribunal with other partners.
9. Cross-Border Trade in Services
Cross-Border Trade in Services (CBTS) refers to the production, distribution, marketing, sale, and delivery of a service, including payment for and use of that service by a consumer. Services differ from goods in that they involve the exchange of advice or expertise rather than tangible products. For example, when an architect designs a new apartment building, the act of designing the building is a service, the building itself is a good.
Provisions of the CBTS Chapter form the foundation for the liberalization of the services market under CETA. In addition to the application of national treatment and MFN obligations, the chapter establishes the scope for services market access under the agreement. Importantly, coverage is defined through a negative list approach. That is, all services are covered by the obligations of the agreement unless explicitly indicated otherwise.
Services market liberalization under the CBTS chapter is complemented by commitments in other, related areas of the agreement. Temporary Entry provisions address barriers at the border for business persons. Commitments under the Domestic Regulation chapter facilitate the provision of services once a border has been crossed. And the Mutual Recognition of Professional Qualifications chapter establishes a framework to support the ability of Canadian and EU professionals to have their qualifications recognized in both jurisdictions. Sector-specific provisions are also established in stand-alone chapters on Telecommunications and Electronic Commerce. Together, these chapters work in concert to ensure broad-based liberalization for services trade between Canada and the EU.
The national treatment obligation of the CBTS Chapter obligates each Party to treat service suppliers of the other Party no less favourably than it treats its own service suppliers in like situations.
Most-Favoured Nation (MFN)
Under the most-favoured nation obligation of the CBTS Chapter, each Party must treat service suppliers of the other Party no less favourably than it treats service suppliers of any other country in like situations. This ensures that the agreement continues to grow and modernize as the conditions of trade further liberalize between the EU and its other trading partners.
The market access obligation of the CBTS Chapter prohibits the imposition of certain types of regulatory measures that would restrict the supply of covered services. Specifically, this obligation prohibits numerical limits on the number of service suppliers; the total value of services transactions or assets; the total number of service operations or the total quantity of service output; or the total number of natural persons who may be employed in a certain service sector.
Reservations are domestic regulatory measures that each Party has listed as not conforming with the key obligations of the CBTS Chapter. Annex I lists reservations that do not conform with the key obligations of the CBTS Chapter. Each Annex I reservation is linked directly to a specific, existing measure (e.g. foreign ownership restrictions). Annex II generally relates to future measures. It grants partial or full exclusion of specific sectors or activities from the obligations of the CBTS Chapter, so as to preserve policy flexibility for a given service sector or activity (e.g. health, public education).
The standstill mechanism ensures that neither Party will impose future measures that are new or more restrictive than those that were in place when CETA came into force. The standstill mechanism only applies to measures listed in Annex I.
The ratchet mechanism ensures that any future regulatory or legal change which makes it easier for service suppliers from one Party to access the other Party’s market will automatically be locked-in under the Agreement and therefore cannot subsequently be made more restrictive. Like the standstill, the ratchet mechanism only applies to measures listed in Annex I.
As in all of Canada’s international trade agreements, Canada has excluded from coverage certain types of services because they are fundamental parts of our social fabric. For example, public services such as health, public education, the collection, purification and distribution of water, and other social services have been excluded from the obligations of CETA, ensuring that governments remain free to enact the policies and programs based on Canadian priorities and objectives. Similarly, CETA preserves policy space for cultural policies and programs at all levels of government, recognizing the importance of the preservation and promotion of Canadian culture, as well as its various forms of expression.
10. Temporary Entry and Stay Of Natural Persons For Business Purposes
Provisions to support the temporary entry of business persons form an integral part of modern trade agreements due to the important role the mobility of highly-skilled business people plays in growing businesses and expanding trade. In addition, substantive obligations on temporary entry can act as enablers for gains achieved in other areas of a free trade agreement, including cross-border trade in services, investment, market access for goods, and government procurement.
The Temporary Entry and Stay Chapter of CETA addresses administrative requirements such as labour market tests or economic needs tests that can impose time delays and administrative costs on prospective business entrants to Canada or the EU. The provisions of the chapter are aimed at increasing transparency and predictability of these requirements. The obligations are differentiated in terms of their application to different types of business people, including intra-corporate transferees, investors, contract service suppliers and independent professionals (including a broad coverage of professionals and limited coverage of technologists), and business visitors.
CETA temporary entry and stay provisions do not cover general labour or low-skilled jobs. As in Canada’s other FTAs, the provisions do not deal with permanent employment, citizenship, residency, or any visa requirements.
Temporary Entry: entry into the territory of a Party by a business person of the other Party without the intent to establish permanently.
Contractual Services Supplier: person employed by an enterprise of one Party which has no establishment in the territory of the other Party and which has concluded a contract to supply services with a consumer in that Party.
Independent Professional: a professional from Canada or the EU providing a service on a temporary basis as a self-employed individual in the other Party.
Intra-Corporate Transferee: a person employed by an enterprise of one Party for at least one year who is temporarily transferred within the same enterprise to the territory of the other Party.
The chapter begins by affirming the mutual objective of Canada and the EU to facilitate trade in services and investment by allowing the temporary entry of individuals for business purposes. At the same time, the Agreement reaffirms that the Parties have a right to apply measures in order to protect the integrity of their territories with respect to physical entry of persons and by ensuring that laws and regulations regarding work and social security measures will continue to apply.
General Obligations - Processing Fees
Fees for temporary entry must reflect the costs of the services associated with their administration only. This is designed to ensure that administrative fees are not used as barriers to increased temporary entry.
Provision of Information
Recognizing the importance of transparency, this article obligates Canada and the EU to make available all explanatory material regarding requirements for the temporary entry of business persons. Data collected and maintained on the entry of various categories of business persons covered by the agreement will also be made available on request by the other Party, subject to domestic law related to privacy and data protection.
Obligations in Other Chapters
This article commits Canada and the EU to provide equitable treatment to each other’s business persons “beyond the border,” by incorporating the main provisions of the Cross-Border Trade in Services. These provisions confer non-discriminatory treatment after business people cross the border.
Commitments and obligations with respect to “beyond the border” treatment vary by category of business person. For example, contract service suppliers and independent professionals will be subject to the relevant provisions of the Cross-Border Trade in Services chapter only for a limited number of sectors. Category-specific coverage is set out in Annex I of the Temporary Entry chapter.
Granting of temporary entry and stay for categories of business persons:
Key Personnel: The Key Personnel article applies to intra-corporate transferees, investors, and business visitors for investment purposes. The article prevents Canada and the EU from limiting the number of key personnel entrants through either numerical standards or economic needs tests. The Parties may also not require work permits for business visitors for investment purposes, provided individuals not engage in direct transactions with the public or receive remuneration from a source within the host Party.
Contractual Services Suppliers and Independent Professionals: The article specifies the standards that contractual services suppliers and independent professionals must meet in order to gain entry. Contractual services suppliers and independent professionals can only supply their services on a temporary basis, and only, respectively, as an employee of their firm or as a self-employed individual. For the former, they must possess at least three years of experience in the sector of activity and at least six years for the latter.
As with the Key Personnel article, Canada and the EU will not, through numerical restrictions or economic needs tests, limit the number of contractual suppliers and independent professionals authorized for temporary entry. The length of stay for contractual services suppliers and independent professionals may not be more than 12 months cumulatively in any 24 month period, or the duration of the contract, whichever is less. The host Party may grant extensions at their discretion.
Short-Term Business Visitors: The article commits Canada and the EU to allow the temporary entry and stay of short term business visitors, provided those visitors do not engage in selling goods to the general public, receive remuneration from sources inside the host Party, or provide services to consumers. Canada and the EU are also prohibited from requiring work permits or other equivalent approval procedures for short term business visitors. Short term business visitors may only be granted temporary entry for up to a total of 90 days within a six-month period.
Annex 10-D to the chapter contains the list of short-term business visitors' activities covered by this article, while Annex 10-B contains member-state specific reservations and exceptions which apply to short-term business visitors and key personnel.
11. Mutual Recognition of Professional Qualifications
The Mutual Recognition of Professional Qualifications (MRPQ) Chapter of CETA establishes a detailed framework that streamlines the process for the negotiation of mutual recognition agreements (MRAs) recognized between Canadian and EU regulators and/or professional bodies. The MRPQ Chapter does not obligate mandatory involvement of professional bodies to negotiate such agreements. When an MRA is signed by the relevant regulators and/or professional bodies, and found to be consistent with obligations under CETA, the MRA becomes binding and is subject to the dispute settlement provisions of the Agreement. Importantly, MRAs recognized under CETA will apply across all Canadian provinces and territories and all EU Member States.
As in past FTAs, including NAFTA, Canada’s approach to MRAs has largely been to encourage the development of MRAs between regulators/professional bodies. The MRA provision in CETA moves beyond this level of engagement by recognizing the roles and relationships of regulators while tailoring the role of government to offer targeted support and oversight to the negotiating process. CETA marks the first time that substantive and binding provisions on the mutual recognition of professional qualifications are included in an FTA to which Canada is a party.
Both Canada and the EU recognize that the regulation of professional qualifications is important as it ensures the preservation of high standards of professional competence for public protection and safety. Accordingly, the MRPQ Chapter provides a streamlined approach for regulators with regard to mutual recognition negotiations, while fully preserving their ability to recognize, regulate and license professionals. Involvement by regulators/professional bodies in the MRPQ Chapter is non-binding and completely voluntary.
Negotiation of an Agreement on the Mutual Recognition of Professional Qualifications
The MRPQ Chapter establishes a clear and streamlined process for regulators/professional bodies from Canada and the EU seeking to pursue and negotiate an MRA.
The recognition provision obligates the Parties to allow a professional covered by an MRA to take up and pursue professional activities in accordance with the MRA, irrespective of where that professional was trained or educated, or of any citizenship or residency requirements. The provision also obligates the Parties to afford each other’s recognized professionals treatment no less favourable than that provided to their domestic professionals.
Joint Committee on Cooperation for the Recognition of Qualifications
Once the regulatory bodies from both jurisdictions have come together to develop an MRA proposal, they submit their recommendations to the Joint Committee on Cooperation for the Recognition of Qualifications, which is comprised of Canadian and EU government officials.
The Joint Committee’s role is to facilitate and oversee the MRA negotiating process, and to ensure that the MRAs that are negotiated are consistent with CETA’s provisions. The Joint Committee will function in parallel to the normal roles and responsibilities of relevant regulatory bodies.
Guidelines for the Negotiation and Conclusion of Agreements on the Mutual Recognition of Professional Qualifications
Guidelines on regulator-to-regulator negotiations are set out in an Annex to the MRPQ Chapter. These non-binding guidelines set out a detailed framework for regulators in one Party to enter into negotiations with their counterparts in the other Party. While non-binding, the guidelines are intended to promote symmetry between MRAs recognized under CETA.
12. Domestic Regulation
The Domestic Regulation chapter focuses on licensing and qualification requirements and procedures that a regulatory authority uses to grant permission to a person to supply a service or carry out some other economic activity. Even with full market access established, foreign services suppliers may find that domestic regulatory requirements and procedures are lengthy, complex and unclear, and thus act as restrictions to trade. Accordingly, the Domestic Regulations chapter sets out provisions to ensure that such regulatory measures do not nullify or impair market access gains achieved through other areas of the agreement.
The objectives of the Domestic Regulation chapter are to ensure that licensing and qualification requirements and procedures in Canada and the EU are transparent, objective, fair, and timely. The provisions apply to the framework for licensing - ensuring that requirements are clear, publically available, and based on objective criteria – and also to procedures, ensuring that the consideration of an application and the granting of a permission are timely and non-arbitrary.
Both Canada and the EU have excluded from the chapter a number of sectors such as social services, aboriginal affairs, minority affairs, cultural industries, and water services. The rules also do not apply to measures related to qualifications and licensing requirements that are already covered by the obligations in the Cross-Border Trade in Services and the Investment chapters of CETA.
Scope of Application
This article links the Domestic Regulation chapter to the Cross Border Trade in Services, Investment and Temporary Entry chapters. In addition, it specifies that the provisions of the chapter will not apply to existing non-conforming measures as listed in Annex I reservations under the Cross-Border Trade in Services and Investment Chapters, as well as certain sectors and activities listed in Annex II reservations.
Transparency and Objectivity
Canadian and EU regulatory authorities will base domestic measures pertaining to licensing qualification requirements on clear, objective, and impartial regulatory criteria, all of which will be publicly available.
Licensing and Qualification Requirements
Canada and the EU have committed to ensuring that determinations regarding whether a service provider or investor meets licensing and qualification requirements are not exercised in an arbitrary manner. This includes commitments to grant authorizations as soon as the relevant authority determines that the necessary conditions have been met, and to ensure that such authorizations come into effect without undue delay.
Licensing and Qualification Procedures
CETA commits Canada and the EU to ensure that licensing and qualifications procedures are as simple as possible and do not unduly complicate or delay the supply of services or the pursuit of any other economic activity. The chapter requires domestic regulators to ensure that procedures and decisions are impartial with respect to all applicants. It also requires that authorization fees be reasonable and that applications be processed within a reasonable timeframe.
Both Parties have further agreed to maintain mechanisms that provide, at the request of an affected service supplier or investor, for a prompt review of a decision made by a domestic regulator.
13. Financial Services
Canada and the EU have included a separate Financial Services chapter in CETA to reflect the unique and important role of this sector in the economy, facilitating transactions across every economic sector as well as mobilizing savings and providing credit for the investments that support long-term economic growth.
The Financial Services chapter applies to measures adopted or maintained by Canada and the EU relating to financial institutions, investors and their respective investments in financial institutions, and cross-border trade in financial services. The chapter tailors the general commitments in CETA to the financial services sector. In addition to national treatment, most-favoured-nation treatment and market access obligations, the chapter includes specific commitments on regulatory transparency and the cross-border transfer and processing of information by financial institutions.
The chapter also introduces a number of provisions specific to financial services. In particular, the chapter contains a prudential carve-out, which ensures that Canada and the EU can continue to take reasonable measures for prudential reasons without violating CETA, for instance to safeguard the integrity and stability of the financial system. Additionally, the chapter adapts CETA’s dispute settlement provisions to reflect the unique nature of financial services. For example, the chapter requires the involvement of financial services experts in the settlement of disputes arising under the chapter, and establishes a filter mechanism to stop unsubstantiated investor claims.
The Financial Services chapter does not apply to regulations relating to public pensions or other means of social insurance. Additional exclusions are set out in the Services, Investment and Financial Services annexes, under which Canada and the EU have taken reservations allowing them to exclude specific laws, regulations or policies from the obligations of the Agreement, or to preserve policy flexibility in certain areas into the future.
The National Treatment article specifies that Canada and the EU must treat each other’s financial institutions and investments in financial institutions no less favourably than they treat their own financial institutions and investments in financial institutions, in like situations.
Under the Most-Favoured-Nation Treatment article, Canada and the EU agree to treat each other’s financial institutions and investments in financial institutions no less favourably than they treat financial institutions and investments in financial institutions of a third country, in like situations.
The Market Access article prohibits Canada and the EU from imposing certain market access limitations on financial institutions. These include limitations on the total number of financial institutions within a given territory, the total value of the assets of financial institutions, the total number of financial service operations undertaken by a firm, the level of foreign investment in a financial institution, the total number of employees in a financial institution, or the types of business ventures and legal entities a financial institution may operate.
Cross-Border Supply of Financial Services
This article commits Canada and the EU to allow a limited range of financial service suppliers to provide their services on a cross-border basis (e.g., from the territory of one Party into the territory of the other), and incorporates the market access and national treatment disciplines from the Cross-Border Trade in Services chapter. These services include reinsurance and auxiliary financial services (the full list of committed financial services is contained in the Annex on Cross Border Trade in Financial Services).
Canada and the EU have agreed to negotiate, within three years of the coming into force of CETA, disciplines tailored for the financial sector on the imposition of performance requirements that constitute barriers to investment, such as local content requirements or restrictions on the volume or value of imports an enterprise can purchase or use. Should there be no agreement within the three year time frame, the performance requirement disciplines of the Investment chapter would be incorporated into the Financial Services chapter. In addition, the Article on performance requirements provides Canada and the EU with flexibility to take exceptions to the performance requirement disciplines once they come into force.
Reservations and Exceptions
The National Treatment, Most-Favoured-Nation Treatment, Market Access and Cross-Border Supply of Financial Services obligations do not apply to a number of government measures and policies. ”Reservations” are taken against these obligations pursuant to the Reservations and Exceptions Article, which contemplates the listing of such measures and policies in annexes to the chapter. For Canada these measures are set out in Annex III. Reservations serve to exclude listed federal and provincial measures and policies from the obligations contained in the chapter, or to preserve policy flexibility for existing and future measures.
The Financial Services chapter contains a prudential carve-out that safeguards the right of Parties to take reasonable prudential measures to protect investors, depositors, and policy holders, and to maintain the integrity and stability of the financial system as a whole, without violating CETA. The prudential carve-out is accompanied by a series of interpretive guidelines, which set out high-level principles clarifying the application of the prudential carve-out, as well as guidance on the participation of the Financial Services Committee in the chapter’s investor-state dispute settlement process where prudential measures are concerned.
Financial Services Committee
This article establishes a Financial Services Committee, which has responsibility for supervising the implementation of the Financial Services chapter, carrying out a dialogue between Parties on the regulation of the financial services sector, and participating in the chapter’s investor-state dispute settlement process in respect of prudential measures. The Committee also provides an opportunity for financial authorities to discuss any matter related to the financial services sector, for instance to avoid or resolve unnecessary barriers to entry experienced by financial institutions.
The Dispute Settlement article tailors the CETA Dispute Settlement chapter to address the unique character of disputes between Parties in the financial services sector. The article requires that arbitrators selected for the arbitral panel in disputes between Parties arising under the Financial Services chapter must have prior expertise in financial services law or regulation. These arbitrators are selected from a standing “roster” of at least 15 individuals established by the CETA Joint Committee, chosen on the basis of objectivity, reliability, and sound judgment. In addition, if a panel rules in favour of the Party initiating the complaint, then that Party may suspend benefits granted under the Financial Services chapter to the other Party, but only if the complaint deals with financial services.
Investment Disputes in Financial Services
This article tailors the CETA investor-state dispute settlement provisions to the financial services sector by recognizing the right of Parties to regulate prudentially. For example, it establishes a filter mechanism under which any measure in respect of which the prudential exception has been invoked is separately reviewed by financial authorities from both Parties to assess whether the prudential carve-out applies. If the challenged measure is determined to be prudential in nature by these financial authorities, such a determination will be binding on the arbitral tribunal and the measure at issue cannot be subject to a claim by the investor.
14. International Maritime Transport Services
Maritime transport plays a central and often overlooked role in global trade, handling over 80% of the volume of global trade and over 70% of its value. In recognition of this sector’s importance, Canada and the EU have included a separate International Maritime Transport Services (IMTS) chapter in CETA. IMTS refers to the transport of passengers and/or cargo between different countries, including the direct contracting of suppliers of other transport services.
This article establishes that government measures affecting the IMTS sector are subject to the provisions of CETA’s Investment and Cross-Border Trade in Services (CBTS) chapters, including obligations not to maintain discriminatory measures with respect to accessing and using ports, and the use of infrastructure and services of ports. The IMTS chapter also sets out certain obligations that extend beyond the disciplines of the CBTS and Investment chapters.
This article contains specific obligations for Canada and the EU including:
- commitments by the Parties to allow, subject to a Party’s non-conforming measures, international maritime service suppliers to provide the repositioning of owned or leased empty containers on a non-revenue basis, as well as provide feeder services for international cargo between ports in each other’s territory. In Canada, feeder services may be provided by EU service suppliers only between the Ports of Halifax and Montreal.
- a prohibition on cargo-sharing arrangements with third countries, to ensure competitive access to these cargoes;
- an obligation to provide unrestricted access to the carriage of government cargo; and
- an obligation to provide IMTS suppliers with the ability to contract directly with road and rail carriers for the provision of door-to-door multimodal transport operations, such that the IMTS supplier has the right to choose the trucking, rail or air transport company of its choice in getting the cargo to its final destination.
The Non-Conforming Measures article establishes limits on the application of the chapter, clarifying that obligations do not apply to measures enacted by local government. Other national and subnational-level measures that derogate from the obligations of the chapter are set out in CETA Annexes I and II.
The Telecommunications Chapter is composed of provisions related to the use of public telecommunications networks in Canada and the EU, as well as to the physical and procedural aspects of network management. The Chapter also seeks to enhance regulatory certainty for telecommunications service suppliers by including disciplines to ensure that telecommunications regulators act impartially, objectively and in a transparent fashion. In this way, the Chapter supports Canadian telecommunications service suppliers and investors by making the regulatory environment for telecommunications services more predictable and competitive.
Access to and Use of Public Telecommunications Transport Networks or Services:
Canada and the EU are required to provide each other’s firms with non-discriminatory access to public telecommunications networks and services in their territory and across international borders. Under this article firms may purchase, lease, or attach private equipment to the public telecommunications network and use these networks to move information within and across the borders of Canada and the EU.
The fair access article also guarantees the rights of Canada and the EU to take action to protect security and confidentiality of telecommunications services and the privacy of telecommunications users.
Access to Essential Facilities
Canada and the EU will require major domestic telecommunications service providers to provide competitors with access to essential facilities on reasonable and non-discriminatory terms and at cost-oriented rates.
Under this article, Canada and the EU are required to make publically available regulations affecting the telecommunications sector. These can include regulations on fees, conditions and terms of service, technical standards, permits, and licensing requirements. Canada and the EU must also make publically available clear and easily accessed information on the responsibilities of their domestic telecommunications regulators.
Canada and the EU will ensure that telecommunications customers can keep their phone numbers with switching to a new provider, to maximize user convenience and facilitate competition in the telecommunications sector.
While supporting a pro-competitive environment, this Chapter affirms the right of the Parties to restrict the supply of a telecommunications service. This is listed among CETA’s Annex I services and investment reservations.
16. Electronic Commerce
In recognition of the growing importance of electronic commerce (e-commerce) in the global economy, as well as the transformative nature of the technology that enables it, Canada and the EU have negotiated a stand-alone e-commerce chapter within CETA. Both Canada and the EU acknowledge that the future of e-commerce depends on its security and the confidence that consumers and businesses place in it. The Electronic Commerce chapter includes measures to protect personal information and to facilitate cooperation on issues such as the treatment of spam and protection from fraudulent and deceptive commercial practices. The Chapter also includes a commitment to maintain the current framework of not applying customs duties on digital products transmitted electronically as a means to further enhance the transparent and predictable regulatory framework of electronic commerce.
Customs Duties on Electronic Deliveries
This article imposes a permanent moratorium on customs duties, fees or charges for digital products transmitted electronically between Canada and the EU. Internal taxes and charges may still be applied on digital products transmitted electronically, provided those taxes and charges are consistent with CETA’s other chapters.
The general provisions of the Chapter highlight the conditions that are to be applied in support of e-commerce as an economic development tool. These include commitments by Canada and the EU to maintain clarity and transparency in domestic regulations; promote interoperability, innovation and competition in the commerce sector; and facilitate the use of e-commerce by small and medium-sized enterprises.
Dialogue on E-Commerce
Canada and the EU will maintain an ongoing dialogue on important international e-commerce issues, including the verification of online identities, the treatment of spam, and the protection of consumers and businesses from online fraud. The dialogue will include information exchanges between Canada and the EU on current e-commerce laws and regulations, including information on enforcement practices.
17. Competition Policy
The purpose of the Competition Policy Chapter is to ensure that the benefits of trade liberalization under CETA are not offset by anticompetitive business conduct. Competition policy works to balance interests of consumers and producers, wholesalers and retailers, dominant and minor players, as well as public and private interests.
While CETA’s approach recognizes the independence of each Party to enforce its domestic competition legislation in the ways it sees fit, the chapter provides a framework which ensures that each Party has in place a transparent, non-discriminatory and fair enforcement regime to counter specific types of anticompetitive practices.
The chapter reaffirms the existing commitments made between Canada and the EU under the 1999 Agreement between the European Communities and the Government of Canada Regarding the Application of their Competition Law (the 1999 Agreement). Under that agreement, Canada and the EU established a framework to cooperate with one another with respect to information sharing and enforcement activities.
CETA builds on the framework set out in the 1999 Agreement, setting out a number of commitments by Canada and the EU to take effective enforcement action against anticompetitive business conduct such as cartels, anticompetitive mergers, or abusive behaviour by companies with a dominant market position.
Preventing Anti-Competitive Business Conduct
Canada and the EU agree to undertake measures, in accordance with the 1999 Agreement, to ensure ongoing cooperation on the barring of anticompetitive business conduct.
Protected Information and Dispute Settlement
The chapter provides that the provisions of the competition chapter are exempt from all forms of dispute settlement available under the Agreement. A separate provision further clarifies that Canada and the EU are not required to disclose information protected under Canadian and EU domestic competition law, where the Commissioner of Competition is legitimately made a Party to a dispute settlement procedure under CETA. These provisions are designed to recognize the domestic nature of competition policy and ensure the continued protection of proprietary information disclosed to competition authorities in Canada and the EU.
Both Parties have committed to transparency regarding exclusions from the application of their competition laws. Specifically, public information will be made available concerning such exclusions.
18. State Enterprises, Monopolies and Enterprises Granted Special Rights or Privileges
A state enterprise is a business that is owned or controlled by a government. State enterprises are created as instruments of public policy in order to fulfill specific economic or social functions, and in some cases provide goods or services that would not be feasible for a private sector company to offer. They often operate as monopolies, but in some cases interact or compete with private sector enterprises.
Maintaining fair market competition requires that monopolies and state enterprises generally act in accordance with commercial considerations and avoid discrimination against foreign enterprises. In practice, this means these entities must act in a way that is consistent with the customary business practices of a privately held enterprise in the related business or industry, unless the fulfilment of their purpose or public mandate requires otherwise.
CETA acknowledges the right of governments to establish monopolies or state enterprises to further specific public policy objectives, but also seeks to ensure that they do not unduly hamper the free flow of trade. Accordingly, the Monopolies and State Enterprises Chapter establishes rules and disciplines for state enterprises to protect the market from any trade distortions that might arise from their interaction with private enterprises
The Parties will ensure that monopolies and state enterprises in their territories will accord non-discriminatory treatment to investments and to goods and services suppliers from the other Party.
Monopolies and state enterprises of a Party must accord non-discriminatory treatment to investments and to goods and services suppliers from the other Party in the purchase or sale of goods or services.
Unless the fulfilment of their purpose or public mandate requires otherwise, monopolies and state enterprises of a Party must act in accordance with commercial considerations with investments and goods and services suppliers from the other Party in the purchase or sale of goods or services. For trade in goods, commercial considerations refer to practices with regard to price, quality, availability, marketability, transportation and any other terms and conditions of trade.
19. Government Procurement
Government purchases of goods and services account for significant levels of total economic activity in both Canada and the EU. The EU’s overall government procurement market alone is estimated at approximately $3.3 trillion per year. Expanding access to this market for Canadian businesses constituted a key objective for Canada in the negotiation of CETA.
As Parties to the World Trade Organization Agreement on Government Procurement (GPA), Canada and the EU have already committed to rules regarding non-discrimination, impartiality and transparency in their procurement activities. However, these rules apply to limited procurement activities of governments in Canada and the EU. CETA builds upon those commitments by opening up competition to a much wider range of government procurement activities.
Under CETA’s GP chapter, both the EU and Canada have committed a wide range of contracting entities (e.g. central, sub-central, municipal government entities, government enterprises, etc.) to ensuring that their procurement activities, above certain monetary values, are conducted in a nondiscriminatory, impartial, transparent and accountable manner.
This means that in CETA, Canadian suppliers have, for the first time, guaranteed and secure access to opportunities to supply their goods and services to EU regional and local governments, as well as a wide range of entities operating in the utilities sector. The Chapter also builds on Canada’s own GPA commitments, in particular with respect to providing EU suppliers with guaranteed and secure access to sub-national procurement opportunities (e.g. provincial/territorial governments, municipalities, academic institutions, schools, hospitals, etc.).
The Agreement does not automatically apply to all government procurement in Canada and in the EU. Coverage is set out in the annexes, which list the entities that the Parties have agreed are subject to procedures and obligations of the GP Chapter. The annexes are organized to separately identify the entities at the central government level, sub-central government level, and other entities such as Crown corporations or public utilities. The applicable contract-value thresholds (i.e. the contract value at which the obligations begin) are found for each group in the corresponding annexes. These procurement thresholds are consistent with those Canada applies in the WTO GPA. Other annexes list the goods, services and construction services to which the non-discrimination principles apply.
Under the GP Chapter, Canada has also agreed to establish a single electronic point of access (SPA) for procurement tenders. The SPA, which will be similar in function to a single electronic point of access already maintained by the EU, will allow suppliers to quickly retrieve information about all opportunities in Canada covered under CETA. Given the technical complexity of developing such a system, Canada has five years from the entry into force of CETA to implement the SPA.
This article establishes the general principles for the Parties’ procurement activities, including non-discrimination, transparency and impartiality. These principles provide assurances that Canadian and EU suppliers are able to compete on an equal footing in the other Party’s government procurement markets when bidding on opportunities covered by CETA.
The Parties are required to publish publicly available information on individual procurement opportunities, as well as on the rules that are applied during a competitive procurement process. Importantly, the rules also require the publication of information on contract awards so that unsuccessful bidders can better position themselves for future procurements.
Conditions for Participation
The chapter establishes parameters on the conditions that can be used to determine the eligibility of a supplier to participate in a procurement process. For example, while Parties can require that suppliers have prior experience, they cannot require prior experience in the territory of procuring entity. Also, Parties cannot require suppliers to have been previously awarded a contract by the procuring entity.
Qualification of Suppliers
The chapter permits Parties to maintain supplier registration systems for use during procurement processes in order to reduce the time needed to complete such processes. At the same time, the chapter clarifies that differences between registration systems should be minimized, and that the use of such registration systems should not create unnecessary obstacles to the participation of suppliers from the other Party.
Technical Specifications and Tender Documentation
Procuring entities must ensure that prospective suppliers have all the information necessary to prepare and submit bids for a procurement opportunity. This information includes a description of the nature and quantity of goods or services being procured, conditions for the participation of suppliers, and the evaluation criteria that will be used to select a supplier. Technical specifications should be based on international standards, and described in terms of functional or performance requirements.
The chapter mandates minimum time periods to ensure that there is sufficient time for suppliers to prepare and submit their offers. The time period provisions do, however, provide flexibility in terms of timelines when procuring entities use electronic procurement tools or in the event of extenuating circumstances.
Domestic Review Procedures
Under the GP Chapter, Parties are required to establish or maintain domestic review procedures that enable potential suppliers to challenge procurement decisions that they believe run contrary to the obligations in the GP Chapter. Providing suppliers with the right to challenge a procurement decision increases their confidence that the process will be conducted fairly and impartially. It also eliminates the need for suppliers to involve their home governments when they believe their rights under the agreement have been violated.
Canada and the EU have maintained the ability to protect human health, the environment, national security and public safety, and excluded certain sectors from CETA government procurement obligations (such as research and development; financial services; public administration; recreational; cultural; sporting; educational; social; and healthcare services). The agreement also sets out a number of country-specific exclusions.
20. Intellectual Property
An effective intellectual property rights (IPR) regime is important for Canada’s growing knowledge-based economies and helps to foster competitiveness, innovation and creativity. A significant portion of the value in many traded products today – from film and music recordings, to prescription drugs and new services and many others - is derived from creative and innovative processes that are fostered in part by intellectual property rights (IPRs). CETA’s Intellectual Property Rights Chapter promotes effective protection for Canadian and European Union IPR holders, through specific commitments for copyright and related rights, trademarks, designs, patents, geographical indications, plant varieties, as well as IPR enforcement measures and cooperation between Canada and the EU. CETA’s IPR chapter complements the rights and obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), to which Canada and the EU are both party.
The IPR chapter is divided into five sections, each dealing with a different aspect of establishing consistency between IP regulations in Canada and the EU. The Principles section lays out the general principles to be followed in the chapter. The IPR standards section sets out the standards followed by CETA for different categories of intellectual property rights, such as copyrights and geographical indications. This section also identifies which agreements CETA builds on and incorporates for each category. The IPR Enforcement section establishes the procedures and principles to be followed by the Parties to address cases of IPR infringement. The Border Measures section sets out the procedures to be followed to prevent the import and export of products infringing on IPR. Finally, in the Cooperation section Canada and the EU agree to cooperate in the areas covered by the IPR chapter.
Copyright: rights that creators have over their original dramatic, musical, artistic and literary works.
Trademark: a sign, such as a word, design, or a combination of these, used to distinguish the goods or services of one enterprise from those of other enterprises
Patent: a time-limited, exclusive right granted for an invention that prevents others from using, manufacturing or selling the invention without the patent owner’s permission.
Industrial design: the decorative, non-functional part of a mass-produced article (e.g. a pattern on the arm of a chair, the configuration of lines on the handle of a toothbrush, the shape of a bottle).
Geographical indication: a sign that identifies an agricultural good (product or foodstuffs) that has a specific geographical origin and possesses a quality, reputation or other characteristic that is essentially attributable to that place of origin (such as : Brie de Meaux, Camembert de Normandie or Gouda Holland).
Canada and the EU will determine the appropriate method of implementation for the intellectual property provisions of the agreement, within their own legal systems and practices.
Commitments Concerning Intellectual Property Rights - Copyright and Related Rights
CETA’s copyright provisions reflect key reforms made recently to Canada’s copyright law, including changes implemented through the Copyright Modernization Act. Canada and the EU have indicated a commitment to comply with international agreements: the Berne Convention for the Protection of Literary and Artistic Works, the World Intellectual Property Organization (WIPO) Copyright Treaty, the WIPO Performances and Phonograms Treaty, and the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations. The IPR chapter includes measures against unauthorized camcording of presentations of films, as well as protection for technological protection measures (i.e. digital locks), which are used by rights holders to prevent unauthorized access to and use of copyright material, and protection for rights management information, which is used by rights holders in association with copyright material. The liability of internet service providers (ISPs) for copyright infringement is also clarified in-line with current Canadian law.
Commitments Concerning Intellectual Property Rights - Trademarks
Both Canada and the EU will work to bring their IPR regimes in-line with international agreements, namely 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, which will encourage more effective trademark and industrial design procedures based on international standards.
Commitments Concerning Intellectual Property Rights - Geographical Indications (GIs)
CETA includes protections for a number of EU agricultural GIs in Canada. The GIs provisions include several Annexes to the intellectual property chapter. Part A of Annex 20-A contains the list of GI terms that will be protected. Part A of Annex 20-B lists certain terms in English and French that are subject to exceptions from the protections. Annex 20-C lists product classes that delineate the types of goods against which GI rights can be enforced by rights holders. CETA also provides that additional GIs may be added at a later date, subject to agreement of both Canada and the EU. Protection of GIs for wines and spirits will continue as agreed in the Canada-EU Agreement on Trade in Wines and Spirit Drinks signed in 2003, which has been included in CETA.
Commitments Concerning Intellectual Property Rights - Protections Specific to Pharmaceutical Products
With respect to intellectual property protection for pharmaceuticals, CETA encompasses provisions in three separate areas. Canada and the EU have agreed to an additional period of protection for eligible pharmaceutical products. The length of the period will be calculated based on a formula and capped at a maximum period of two years in Canada’s case and five years for most products in the EU.
The Parties have also agreed to ensure that all litigants are afforded equivalent and effective rights of appeal under patent linkage regimes. Finally, and in line with current Canadian practice, the Parties have agreed to ensure eight years of protection for data filed with regulators as part of a regulatory approval process.
Commitments Concerning Intellectual Property Rights - Data Protection on Plant Protection Products
Canada and the EU have agreed to ensure ten years of protection for data filed with regulators as part of approval for plant protection products (i.e., pesticides), which is consistent with the Canadian regulatory approach for pesticides.
Commitments Concerning Intellectual Property Rights - Plant Varieties
The Plant Varieties article promotes and reinforces the protection of new plant varieties, based on the International Convention for the Protection of New Varieties of Plants. CETA does not require changes to “farmers’ privilege” which allows farmers to save, condition, and replant seeds of a protected variety on their own land, pursuant to Canada’s Plant Breeders Rights’ Act.
Enforcement of Intellectual Property Rights and Border Measures
The chapter sets out provisions designed to ensure simple, fair, equitable, and cost effective enforcement of IPR rights. The enforcement provisions provide civil and border remedies to help prevent illegitimate trade. CETA enforcement framework is aligned with Canada’s current regime except for the addition of geographical indications to the scope of IPR border enforcement. For example, the agreement commits the Parties to provide for court injunctions, measures to preserve relevant evidence in cases of alleged IPR infringement, and authority for courts to order the production of relevant information in the context of a civil proceeding.
The cooperation subsection sets out provisions for Canada and the EU to continue to discuss relevant issues that relate to intellectual property. As part of this dialogue, the Parties have committed to share information and experiences in dealing with IPR.
21. Regulatory Cooperation
Canada and the EU have been cooperating in the area of regulatory development for some time. Since 2004, Canadian and EU regulators have been working through the Framework on Regulatory Cooperation and Transparency to promote best practices aimed at eliminating unnecessary barriers to trade and investment. The Framework set out a number of high-level objectives, and established a Canada-EU Regulatory Cooperation Committee (RCC) to oversee a program of work involving specific sectorial initiatives.
The Regulatory Cooperation Chapter builds on the RCC and strengthens cooperation in regulatory matters to promote forward-looking, early engagement between Canada and the EU as new measures are being developed. By facilitating earlier access to regulatory development processes under CETA, it is expected that the differences in regulatory approaches between Canada and the EU will be reduced over time, resulting in fewer barriers to trade when regulations are implemented.
The Chapter contains a range of provisions designed to achieve this. The 2004 Framework will be reconstituted as the Regulatory Cooperation Forum (RCF), which serves as the mechanism through which Canada and the EU undertakes the cooperation activities provided for in the Chapter. The agreement also provides for terms of reference, procedures, and a work-plan for the RCF to be created within six months of CETA entering into force. While the mandate of the RCF will be to seek regulatory convergence where feasible, it is a voluntary mechanism. Either Party may decline to cooperate or withdraw from cooperation at their discretion. The goal is not regulatory harmonization, but rather, effective regulation that facilitates trade. Each party retains complete control over its own regulatory process.
The Chapter commits Canada and the EU to identify potential joint cooperative activities in which Canadian and EU regulatory authorities can engage.
Regulatory Cooperation Forum
The RCF will meet annually and help to identify potential areas for cooperation, and facilitate discussions between regulatory authorities in Canada and the EU. In addition, the RCF will encourage cooperation between regulators and the sharing of information with a view to minimizing the differences in regulatory approaches.
The chapter commits the Parties to discuss further cooperation regarding consumer products. This allows Canada and the EU to share more information about product safety issues, thereby facilitating the protection of public health and safety.
22. Trade and Sustainable Development
Future prosperity depends in large part on the ability to develop economies in a sustainable manner. Economic development, social development and environmental protection are interdependent and reinforcing components of sustainable development.
The Trade and Sustainable Development chapter, in concert with the Trade and Labour and Trade and Environment chapters of CETA, reflects shared Canadian and EU values in recognizing that economic, social, and environmental objectives are mutually supportive and reinforcing. By establishing shared commitments, this Chapter helps to ensure economic growth under the agreement does not occur at the expense of other important social and environmental objectives. This chapter also clarifies that the scope of the obligations undertaken in the labour and environment chapters are to be understood in their trade context.
Cooperation and Promotion of Trade Supporting Sustainable Development
The chapter recognizes the value of international cooperation to achieve the goal of sustainable development, and commits the Parties to dialogue and consult on trade-related sustainable development issues of shared interest. It also establishes commitments for the Parties to promote trade in a manner that contributes to the objectives of sustainable development, for example by encouraging businesses to adopt voluntary practices of corporate social responsibility that promote economic, social and environmental objectives, and by promoting practices such as the use of eco-labeling and setting environmental performance goals and standards. The chapter also commits Parties to review, monitor and assess the impact of the implementation of CETA on sustainable development in both economies.
The chapter establishes a Committee on Trade and Sustainable Development, comprised of high level representatives of the Parties, responsible for matters covered by the chapters on Trade and Sustainable Development, Trade and Labour, and Trade and Environment. The role of the committee is to oversee the implementation of the three chapters, including review of the impacts of CETA on sustainable development, and to facilitate cooperative activities. Committee meetings include a public engagement component unless otherwise jointly specified by the Parties.
Civil Society Forum
The chapter commits Parties to facilitate meetings of a joint Civil Society Forum, which will conduct a dialogue on issues related to trade and sustainable development in the context of CETA. The Civil Society Forum will include a balanced representation of relevant interests, including independent representative employers, unions, labour and business organizations, environmental organizations, and other civil society representatives as appropriate.
23. Trade and Labour
CETA’s commitments with respect to labour provide additional assurances that high standards of labour protection will be maintained as bilateral trade increases following the agreement’s coming into force. The CETA chapter on Trade and Labour contains comprehensive labour rights obligations and reaffirms the commitments of both Canada and the EU to respect internationally recognized labour rights and principles and to effectively enforce their domestic labour laws. CETA’s labour provisions encourage public participation and allow the public to raise concerns. The labour chapter also foresees cooperation between the Parties and provides procedures for the resolution of disputes.
Multilateral Labour Standards and Agreements
Under CETA, Canada and the EU have committed to respect and promote internationally-recognized labour rights and principles, as set out in the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work of 1998. This includes the right to freedom of association and collective bargaining, the abolition of child labour, the elimination of discrimination in respect of employment and occupation, and the elimination of forced or compulsory labour. The Parties have also committed to promote health and safety at work, acceptable minimum employment standards, and non-discrimination in respect of working conditions, particularly for migrant workers.
Enforcement Procedures and Administrative Action
Canada and the EU commit to effectively enforce their domestic labour laws, including by maintaining a system of labour inspection in accordance with their international commitments. Parties also ensure effective recourse to administrative and judicial proceedings in the event of infringement of their domestic labour laws and that those proceedings are fair and equitable, and are not unnecessarily costly or complicated for citizens.
Right to Regulate
While Canada and the EU commit to continuing to improve their labour laws with a view to providing high levels of labour protection, the chapter also guarantees the right of both Canada and the EU to set their own labour priorities and levels of protection.
Upholding Levels of Protection
The chapter prevents both Parties from either waiving or offering to waive their labour laws as a means of encouraging trade or investment. The Parties also commit not to fail to enforce their labour laws and standards to encourage trade or investment.
Institutional Mechanisms - Civil Society Advisory Groups and Public Mechanism
The Institutional Mechanisms article states that each Party will consult with domestic labour and sustainable development advisory groups in order to allow civil society to provide views and advice on issues related to the chapter.
Additionally, the Trade and Labour chapter establishes that both Parties give and receive due consideration to submissions from members of the public on concerns related to the chapter, including communications on implementation concerns.
The Chapter establishes that a Party may request consultations regarding any matter arising under the chapter. Canada and the EU have agreed to make every attempt to reach a mutually satisfactory agreement on such matter through consultations. If these consultations are unsuccessful, an independent panel of three experts may be convened to examine the matter further.
The panel produces an interim and a final report outlining its findings, determinations and recommendations with respect to conformity with the obligations under the chapter. If the review panel determines in its final report that there is non-conformity, the Parties engage in discussions with a view to identifying appropriate measures or a mutually satisfactory action plan, based on the panel’s report, to resolve the matter.
Canada and the EU affirm the obligations under the chapter as binding and enforceable. Within this context, the Parties commit to discussing the effectiveness of the implementation of the chapter, as well as domestic labour-related policy developments, international labour agreement developments, and views presented by stakeholders. Possible reviews of disputes resolution procedures are also provided for under the chapter.
Canada and the EU commit to cooperate to promote the objectives of the Trade and Labour chapter, including by exchanging information on best practices; sharing information regarding the labour provisions of their respective trade agreements; and cooperating on trade-related labour issues in international fora (particularly at the WTO and ILO).
24. Trade and Environment
Canada recognizes the increasingly important intersection between enhanced trade and environmental protection objectives. For this reason, CETA directly incorporates commitments to help ensure that trade and environmental protection are mutually supportive and reinforcing, and that the increased prosperity resulting from liberalized trade does not occur at the expense of environmental protection.
The objectives of the Trade and Environment Chapter are to support sustainable development, strengthen environmental governance, build on the international environmental agreements to which both Canada and the EU are a party, and complement the objectives of CETA. These objectives are supported by provisions that include both commitments and mechanisms for dialogue and cooperation on trade and environment issues.
This Chapter contains commitments that require the continued effective enforcement of domestic environmental laws, and ensure promotion of public awareness and transparency regarding those laws. Additional provisions address environment-related resource management issues in relation to trade in forest and fish products.
Right to Regulate and Levels of Protection
The Chapter recognizes the right of both Canada and the EU to set their own environmental priorities and corresponding levels of protection. With this in mind, the Parties commit to strive for high levels of protection in their domestic laws and policies, and to continue to develop and improve their environmental laws and policies.
Affirmation of Multilateral Environmental Agreements
Recognizing the value of international environmental agreements as a response to global environmental problems, Canada and the EU reaffirm their commitments to the various multilateral environmental agreements they have signed.
Effective Enforcement and Non-derogation
The Parties commit to effectively enforce their respective domestic environmental laws, and not to waive or derogate from those laws in order to encourage trade or investment.
Access to Remedies and Public Information
CETA’s Trade and Environment Chapter contains provisions to ensure that domestic proceedings are available to remedy violations of environmental law. The chapter also requires the Parties ensure that information regarding environmental laws and policies is made available to the public.
Fisheries and Forestry
In addition, Canada and the EU commit to encourage trade in products from sustainably managed forests and to promote the sustainable and responsible management of fisheries and aquaculture.
The Parties commit to cooperate on trade-related environmental issues, in areas such as facilitating and promoting trade and investment in environmental goods and services, climate change, and biodiversity.
CETA’s Trade and Environment Chapter allows for consultations between the Parties regarding any issue arising under the chapter. Should consultations be unsuccessful in resolving the issue, the chapter allows for the establishment of a panel of experts to prepare a final report with findings and recommendations on the issue, and which would be made available to the public.
25. Bilateral Cooperation and Dialogues
The Dialogues and Bilateral Cooperation chapter draws on established partnerships and common interests between Canada and the EU in a number of areas. The chapter sets out provisions through which Canada and the EU commit to engagement in the areas of biotechnology, forestry, raw materials, and science and technology. In some cases, these provisions update existing agreements and arrangements between the Parties, encompassing them within the framework of CETA as a whole.
Under CETA, the existing Canada-EU Dialogue on Biotech Market Access Issues established in 2009 continues to facilitate cooperation and information sharing regarding biotechnology-related measures that can affect Canada-EU trade, including the domestic approval of biotechnology products, trade impacts of asynchronous product approval or release, as well as new biotechnology legislation. In addition, under CETA, the Dialogue is enhanced to cover additional topics such as international and regulatory cooperation on biotechnology issues.
Science, Technology, Research and Innovation
Canada and the EU commit to enhanced cooperation in the area of science, technology, research, and innovation by all levels of government as well as by private sector, research, and civil society organizations. This CETA dialogue is designed to enhance the 1996 Canada-EU Scientific and Technological Cooperation Agreement.
Canada and the EU have agreed to cooperate and exchange information on laws, regulations, policies and other issues related to the production, trade and consumption of forest products. This dialogue enables engagement on any topic in this area, including the development, adoption and implementation of laws, regulations, policies, standards, testing, certification and accreditation. The dialogue is also designed to facilitate cooperation related to sustainable management of forest products and forest governance mechanisms.
The dialogue on raw materials provides a forum to discuss issues relating to market access for raw materials, including metal and mineral products, as well as related services and investments. This facilitates the exchange of information regarding best practices concerning regulatory policies in these areas. The dialogue is also designed to encourage activities that support corporate social responsibility.
26. Administrative and Institutional Provisions
The Administrative and Institutional Provisions chapter defines how the Agreement will be jointly managed and implemented by Canada and the EU. The chapter establishes the structure and processes of the various Canada-EU committees, each of which play an important role in administering CETA. This area of the Agreement is important in providing the administrative and institutional context that allows CETA to be interpreted and applied in a consistent manner.
CETA Joint Committee
This article establishes an overall trade committee, the CETA Joint Committee, which oversees and facilitates the implementation and interpretation of the Agreement. The Joint Committee supervises the work of the various committees and dialogues established under CETA, and is co-chaired by Canada’s Minister of International Trade and his/her EU counterpart.
The committees and dialogues that function under the Joint Committee focus on several areas covered under the Agreement, including goods, services and investment, sustainable development, sanitary and phytosanitary measures, regulatory cooperation and joint customs cooperation.
The Joint Committee supervises the work of all the established specialized committees and has the power to take decisions regarding the interpretation of all matters covered under the Agreement. Moreover, if both Parties agree to the decisions of the Joint Committee, those decisions are binding, requiring both Parties to take all measures necessary to implement them. If the Parties do not agree with a decision taken by the Joint Committee, they may pursue a resolution via the dispute settlement mechanism under the Agreement.
The Transparency chapter constitutes part of the institutional framework for CETA as a whole. The provisions of the chapter are designed to facilitate cooperation between the Parties in the area of information sharing, and to ensure administrative proceedings are fair and just. In addition, the chapter helps ensure that Canadian and EU stakeholders are either notified of, or have access to information regarding measures that may affect trade under CETA.
Transparency provisions are generally included in all of Canada’s FTAs. As such, the processes and mechanisms set out in the CETA transparency chapter are already well established and operational in Canada.
The Publication article requires that each Party publish in a timely manner all laws, regulations, procedures and administrative rulings of general application respecting any matter covered by CETA.
This article provides individuals or companies of either Party certain rights to due process when they are subject to administrative rulings. For example, an affected individual or company has the right to present facts and arguments in support of their position prior to any final administrative action.
Review and Appeal
The Parties commit to providing individuals or companies of either Canada or the EU a right to appeal against administrative rulings through established domestic judicial or administrative tribunals.
The exceptions chapter sets out commitments made between Canada and the EU to exclude certain areas from CETA, usually for reasons of national interest. For example, the Agreement does not prevent a Party from taking action to protect its national security interests. Some of the exceptions are applicable to the entire Agreement while others only apply to certain chapters. Generally, these exceptions are designed to ensure that Canada and the EU maintain the right to take action in the public interest. The Chapter also sets out where Canada or the EU may impose measures that would otherwise be inconsistent with CETA obligations to pursue certain policy objectives.
CETA incorporates the same general exceptions as have been adopted at the World Trade Organization in the General Agreement on Tariffs and Trade (GATT 1994) and General Agreement on Trade in Services (GATS). This means that both Canada and the EU are free to enact laws, regulations or policies they consider are necessary to, for example:
- protect human, animal or plant life or health; and
- conserve living and non-living exhaustible natural resources.
The Taxation article in CETA adopts a format that is different from that used in other trade agreements concluded by Canada. However, the basic objectives are the same. This article contains a number of provisions intended to preserve existing taxation practices and secure flexibility in the development of future tax policies. It also contains procedural provisions that allow the Parties to launch consultations in circumstances where a Canadian or EU investor wishes to address a taxation measure in terms of its conformity with the provisions of the CETA investment chapter. Should consultations result in an agreement between the Parties regarding a specific investor claim, this would be binding on any CETA arbitral tribunal established to address the issue.
Exceptions for Culture
Canada has long been a leader in the promotion of culture, and considers the preservation and promotion of cultural identity and expression to be core elements of public policy. For free trade agreements Canada’s approach has been to exempt cultural industries entirely from the agreement. In 1989, Canada negotiated a cultural exemption in its free trade agreement with the US. The Canada-US FTA, which was incorporated into NAFTA, included a broad cultural exemption applying across the entire agreement, except with respect to tariff elimination.
The EU has also included cultural protections in its FTAs, traditionally focussing on exclusions for audio-visual services as a means of protecting cultural interests.
Under CETA Canada’s approach to cultural protection is comprised of three main elements. First, the Agreement contains a preamble that highlights a commitment to cultural diversity, including the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions. Second, the Exceptions chapter contains text that identifies the specific chapters where a cultural exemption applies. Third, there are targeted exceptions for cultural industries in five specific chapters across the agreement. These are:
- Subsidies: Subsidies and government support for audio-visual services for the EU and cultural industries for Canada are excluded.
- Cross-border Trade in Services: The chapter clarifies that services commitments do not apply to measures affecting cultural industries for Canada and audio-visual services for the EU.
- Investment: Certain elements of the chapter do not apply to measures affecting cultural industries.
- Government Procurement: The chapter does not apply to certain types of procurement related to cultural industries, such as Québec entities’ procurement of artistic works by local artists for a public building or site.
- Domestic Regulations: The chapter does not apply to licensing requirements and procedures, or to qualification requirements and procedures in certain sectors, including cultural industries for Canada and audio-visual services for the EU.
29. Dispute Settlement
Rules-based dispute resolution mechanisms are a critical component of FTAs. They provide the assurance of fair treatment with regard to the settling of disagreements between FTA partners, and promote fairness, predictability, and security by providing recourse to objective panels to resolve disagreements in an impartial and timely manner.
Canada’s primary objective in negotiating the dispute settlement chapter was to ensure expeditious and effective resolution of commercial disputes between Canada and the EU. As a result, the scope of the chapter is broad. The CETA dispute settlement mechanism applies to any disagreement pertaining to the interpretation or application of the agreement, unless stated otherwise.
The chapter emphasizes the importance of resolving disagreements through cooperative means, recognizing that formal dispute settlement processes can be time consuming and resource intensive. Accordingly, the chapter contains provisions regarding consultation and mediation, which improve flexibility in resolving trade disputes, and helps ensure that formal dispute settlement is used only as a last resort.
The commitments of the chapter compliment the multilateral dispute settlement framework as set out in the WTO. For any given dispute, Canada or the EU are able to utilize the WTO dispute settlement process if they so desire. However, the Chapter specifies that the same dispute cannot not be heard simultaneously under both WTO and CETA dispute settlement processes.
Under the Cooperation article, Canada and the EU commit to making every attempt to resolve disagreements and disputes through cooperative and consultative means. This is designed to ensure the smooth functioning of the agreement, and minimize the usage of formal dispute settlement processes.
Choice of forum
This article establishes that the CETA dispute settlement process is independent of its WTO counterpart. The choice of forum article also prevents the Parties from seeking redress in one forum until a process initiated in the other has concluded.
The chapter establishes that consultations are to be initiated before the Parties resort to the formal dispute settlement panel process. The Parties commit to make every effort to arrive at a mutually satisfactory resolution of issues through consultations, including through the provision of relevant information and access to government personnel with expertise on the issue under dispute.
Disputes may be resolved through mediation upon mutual agreement by the Parties. Consultations are encouraged, but not required, before a mediation procedure is initiated.
Detailed provisions on mediation, including procedural rules and requirements for the selection of a mediator are set out in an annex to the dispute settlement chapter.
Dispute settlement procedures
The chapter sets out rules of conduct to govern the adjudication of formal disputes. These are very detailed provisions governing all aspects of the dispute process, including panel composition, timelines for establishing panels and making submissions, confidentiality and transparency arrangements, and rules governing compliance.
Of particular note is the requirement for the Parties to maintain a roster of panellists. This requirement ensures there is no possibility of procedural delay resulting from the refusal of a Party to identify panellists for dispute settlement proceedings.
30. Final Provisions
The Final Provisions chapter provides the legal language needed to bring CETA into force. It also includes provisions for amendments to the text and processes for termination, should Canada or the EU wish to withdraw from the agreement. In addition, the chapter establishes measures related to new, acceding EU Member States that would be subject to commitments under CETA.
This provision allows Canada and the EU to collect and exchange statistical information regarding the extent to which traders are claiming CETA preferential tariff treatment. Evidence that traders are not taking advantage of CETA could help identify areas where administrative or customs improvements could increase utilization of the agreement, thereby strengthening trade.
Accession of new Member States of the European Union
This provision specifies that CETA applies to any new EU Member State from the date of its accession to the EU. The EU is responsible for notifying Canada of any request by a state seeking accession to the EU. In addition, during negotiations between the EU and a state applying for accession, Canada may request information or present any concerns with regard to the accession as it relates to any matter covered under the Agreement.
Either Party can terminate the Agreement by giving six months’ notice in writing to the other Party.
Protocol II: Mutual Acceptance of the Results of Conformity Assessment
Conformity assessment refers to any procedure used to determine that requirements for a product, including technical regulations or standards, are met. Product testing and certification are often key components of conformity assessment, and are often required before a product is authorized for sale on the market. For example, child seats for vehicles must be tested and certified as meeting the appropriate safety requirements before they can be sold.
Not all jurisdictions are alike in terms of the manner in which they apply conformity assessment procedures. While countries may share similar goals with respect to protecting public health and safety, they often have different approaches or requirements when it comes to product testing and certification. In addition, the results of a conformity assessment process in one country may not be recognized in another. This can impose additional costs and delays for producers who wish to export.
The CETA Protocol on Conformity Assessment addresses these issues by creating a framework for Canadian businesses to bring certain products to the EU market without needing to have their products tested twice. The Protocol achieves this by establishing a mechanism through which Canadian conformity assessment bodies in certain product categories can test products to certify their conformity with EU technical regulations, and have that certification recognized and accepted in the EU.
The Protocol is unique among Canadian and EU trade agreements, and was developed specifically to complement the provisions of the chapter on Technical Barriers to Trade (TBT). Whereas the TBT Chapter addresses conformity assessment in an effort to ensure similar practices, the Protocol attempts to address the issue of duplicative procedures.
Conformity assessment body: A conformity assessment body (CAB) is typically a testing facility or laboratory which conducts testing, calibration, and inspection services. CABs typically certify products with respect to a particular set of technical regulations and standards.
Designating Authority: A designating authority is body that has the power to designate, monitor, and suspend conformity assessment bodies under its jurisdiction. In Canada, designating authorities are more frequently referred to as accreditation bodies.
Designation/Accreditation: Designation/accreditation refers to the granting of authorization to a CAB to perform conformity assessment activities.
Products covered under the Protocol will initially include, amongst others, machinery and equipment, radio and telecommunications, and measuring devices. Canada and the EU have also committed to continue discussions to expand the scope of coverage, and to continue confidence-building activities involving the recognition of accreditation bodies of the other Party.
The Protocol clarifies that procedures with respect to government procurement, sanitary or phytosanitary issues, agricultural products, and aviation safety are excluded.
Preservation of right to regulate
The Protocol establishes that nothing in the agreement requires recognition or acceptance of the other Party’s technical regulations, or limit a Party’s right to set technical regulations or conformity assessment procedures.
Procedure for recognition
The Protocol sets out a framework through which the EU can recognize the assessments performed by Canadian conformity assessment bodies. There are two types of recognition. The first involves the accreditation of a Canadian conformity assessment body by an EU accreditation body. The second type allows the EU to authorize a Canadian accreditation body to designate CABs for the testing of products for conformity with EU technical regulations. Reciprocal provisions in the Protocol establish a process for the certification of EU products for conformity with Canadian regulations.
The Protocol also sets out the special provisions relating to the recognition of accreditation bodies in the areas of telecommunications and electromagnetic compatibility. These provisions were included to accommodate the unique requirements of telecommunications regulators in Canada and the EU.
Protocol III: Good Manufacturing Practices for Pharmaceutical Products
Pharmaceuticals are among the most highly regulated products in the economy, reflecting a commitment by governments to maintain high standards of public health and safety, and ensure the use of safe medicines. “Good manufacturing practices” (GMP) refers to the framework that manufacturers must adopt to ensure that their products do not pose a health and safety risk to consumers. In the context of pharmaceuticals, this means drugs that are consistently produced and controlled to meet the quality standards appropriate to their intended use. It is important to note that the Protocol does not relate to the drug approval process.
Canadian and EU regulatory agencies differ in terms of the specific requirements they place on pharmaceutical manufacturers, but share common regulatory outcomes. Accordingly, in 1998 Canada and the EU agreed to mutually recognize each other’s compliance certification processes for pharmaceutical GMP. The GMP Protocol under CETA replaces and updates the 1998 agreement.
The Protocol’s central objective is to reduce the number of duplicative visits and certification requirements faced by pharmaceutical manufacturers that sell their products in both Canada and the EU. As a result of the mutual recognition achieved under the Protocol, regulators in the EU will be able to rely on the certifications granted by Canadian regulators for certain products, and vice versa.
Under the mutual recognition provision of the Protocol, the Parties agree to recognize the GMP compliance programmes of Canadian and certain EU regulatory authorities as equivalent. A procedure is also set out for evaluating new regulatory authorities to ensure that they meet the necessary requirements for recognition under the Protocol. The list of recognized regulatory authorities is set out in an annex to the Protocol.
Two-Way Alert Programme
The Protocol establishes an official channel for timely and ongoing information sharing between Canada and the EU on critical issues that relate to the safety of pharmaceutical products, such as product recalls. Called the “two way alert programme”, this section of the Protocol further obligates the Parties to communicate with one another when one of their regulatory authorities restricts or suspends authorization for the sale of pharmaceutical products by a manufacturer.
Equivalence Maintenance Programme
Recognizing that changes over time may result in divergence between Canadian and EU approaches to pharmaceutical regulation, the Protocol commits the Parties to regularly review each other’s regulatory systems so as to maintain confidence in their mutual recognition of equivalency.
Joint Sectoral Group on Pharmaceuticals
The Protocol establishes a Joint Sectoral Group on Pharmaceuticals, consisting of both representatives from Canada and the EU, to oversee the various administrative aspects of the Protocol. This includes the listing of regulatory authorities and pharmaceutical products that will be covered by the Protocol.
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