Canada - European Union Comprehensive Economic and Trade Agreement: A Snapshot

Following are some highlights from an Economic Viewpoint published on April 22, 2015. See the complete document for more details.

In recent years, Canada has entered into numerous free trade agreements with its trading partners. No fewer than five agreements have come into effect since 2011, including the agreement with South Korea that started January 1, 2015. In all, Canada currently has 11 free trade agreements with various countries, the largest of which is the North American Free Trade Agreement (NAFTA), in effect since January 1994.

This list should grow in the coming years, as ten additional agreements are currently being negotiated, including the Trans-Pacific Partnership involving Canada, the United States, Mexico, Australia, Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam. With that said, the agreement garnering the most attention for this analysis is the one recently concluded with the European Union, namely the Comprehensive Economic and Trade Agreement (CETA).

A wide-reaching trade agreement

The CETA between Canada and the European Union is intended to be a broad agreement that covers trade in both goods and services, along with investment, labour mobility, access to public contracts, the environment, intellectual property rights, regulations, and so forth. It is a highly complex accord, so it is difficult to provide a detailed analysis of each of these aspects. Nonetheless, here are the broad strokes of the agreement:

Close to 99% of Canadian products shipped to the European Union will be exempt from customs duties. On the other side, 98.8% of products from the European Union will be exempt of Canadian customs duties. The main exceptions that are still subject to customs duties involve certain agricultural products.
In terms of trade in services, each party will accord the other's services and service providers treatment that is no less favourable than the treatment that party accords, in similar situations, to its own services and service providers or to third-parties.
The CETA between Canada and the European Union will also include several measures to facilitate the mobility of business people and certain categories of workers between the two zones. The agreement's provisions will allow certain qualified professionals and business people to work in both Canada and European Union member nations. The agreement also stipulates a process of mutual recognition of professional qualifications.
The agreement should give Canadian and European businesses free access to high-value public contracts in both Canada and European Union nations. Public contracts involve the procurement of goods and services in the framework of public administrations' current expenditures or government investments.
CETA will also contain measures to govern direct investment by Canadian and European Union businesses in the other's territory. This should ensure fair and equitable treatment for investors and investments in both zones.
Canada and the European Union have also agreed to work together in a number of ways with regard to regulations and compliance of certain products. In addition, CETA acknowledges the right of Canada and European Union member nations to establish their own environmental priorities and levels of environmental protection in their territories.

Extensive benefits for Canada's economy

Canada and the European Union will benefit from the business opportunities generated by lifting nearly all of the restrictions on the trade in goods and services and on investments. Canadian exporters will have free access to European markets, giving them greater growth potential. Moreover, eliminating customs duties on numerous imported products will lower consumer prices.

CETA should also make Canada more attractive on the global economic scene. Given free access to European markets, along with the agreement already in force with the United States and Mexico, many foreign business could opt to set up shop in Canada. This would help Canada take its place in the global production chain. Note that the structure of global trade is becoming more and more integrated, creating value chains within multinationals and also within most businesses that are outsourcing a growing share of their output.