What is CETA?
The Comprehensive Economic and Trade Agreement (CETA) is a trade agreement between the EU and Canada. Negotiations on this agreement started in 2009. The goal is to strengthen the economic cooperation between the two parties, to make it easier to trade and to reinforce the rules based trading system by setting high standards together.
What are the benefits of CETA
Growth and jobs, Canada is the tenth economy of the world, bigger than Russia or Turkey. It is Europe’s 12th trading partner. CETA will have various economic benefits:
- Tariffs will be largely eliminated, which will save EU businesses around 600 million euros every year
- European businesses will be the first to get access to the Canadian public procurement market, which is worth 30 billion euros every year
- Hurdles to invest will be removed
- Import procedures in Canada will be simplified and made more transparent. This is essential for small companies that do not have the time and resources to navigate the regulatory maze
- European authorities will be allowed to test whether European products fulfil Canadian requirements, which would make exporting to Canada easier and more predictable
- Professional qualifications will be mutually recognised and it will become easier to work in Canada. This is crucial for companies that want to (temporarily) send their workers abroad
- Under CETA, more than 140 European products will be protected in Canada, such as Parmesan cheese and Serrano ham
Why is CETA important?
The economic opportunities that CETA can create are important, the European economy needs revitalisation. Canada is also looking to close other trade agreements, which makes an agreement with the EU even more important. Without it, companies from other countries would be in a better position to operate on the Canadian market.
But CETA is about more than economic opportunities. By closing a high-quality deal with the Canadians, we can set a global standard and example. We will be able to raise the bar. CETA is an ambitious agreement that guarantees an open market and at the same time protects people and planet. Emerging economies often give their national companies unfair advantages or will produce against low standards to grow more quickly. This leads to unfair situations for European companies, low-quality products, bad working conditions and damage to the environment. With CETA, Canada and the EU can work together to promote and strengthen sustainable growth. CETA should be a model for future treaties, especially with rising economies, to force them to adhere to higher standards.
How was CETA negotiated?
The negotiations on CETA began in 2009, after European governments had unanimously authorised the Commission to do so. They gave the European Commission a mandate, which forms the framework for the negotiations and lists what the member States expect to come out of the negotiations. Before and after each negotiating round, the European negotiators reported to the European Parliament and Member States’ trade ministers. There have also been countless events organised by both the Commission, Parliament, Member States and stakeholders, which were a platform to exchange information. National Parliaments were involved through their trade minister.
In 2014, the negotiations were officially concluded and the full CETA text was published online so that it was accessible for all. Under the Trudeau government, the chapter on investment protection was fundamentally changed to improve and modernise it. Canada adopted EU proposed reforms integrally.
Will CETA lead to low quality products in Europe?
When CETA, or any other trade agreement, enters into force, products that enter the European market will still need to adhere to our European standards. Canadian meat that is treated with hormones will not be allowed on our market and neither will for example GMOs that are not permitted within the EU. In CETA, the EU and Canada lay down that standards will not be lowered and that they will work together to counter illegal fishing and logging and the trade in endangered species for example.
CETA does allow Canadian authorities to check whether Canadian products in some sectors that are destined for the European market actually adhere to European standards. Likewise, European authorities will be allowed to check EU products for the Canadian market. The EU and Canada trust each other’s inspection systems and in this way, it is made much easier for companies on both sides of the Atlantic to have their goods checked before export.
What is the role of the regulatory cooperation forum?
CETA contains provisions on setting up a regulatory cooperation forum. In this forum, Canadian and European regulatory agencies will discuss future rules and regulations in a voluntary and non-binding way. They can then give advice to policymakers about this. This will make sure that European and Canadian laws and regulations are compatible, if we want them to be, making it easier for especially SMEs to operate in both markets. Nothing that the regulatory cooperation forum does will be binding for policymakers. European governments and the European Commission, Parliament or Council will remain completely free to make rules and laws as they see fit.
The forum will consist only of civil servants who are working at a regulatory agency. In their daily work, these people will likely speak with stakeholders who are impacted by the work that that agency does, such as business, civil society or NGO representatives.
What is the deal with investment protection and CETA and the freedom for governments to regulate?
Investment protection is needed to guarantee the terms of the agreement, especially with countries where the rule of law is not a given. With Canada, that is not the chief concern, although international treaties are not automatically transposed into Canadian law and therefore cannot always be used in a Canadian courtroom. On the other hand, the Canadians are not so much worried about the Netherlands or Germany, but they are worried about the rule of law and legal systems in some other member states. That cannot be very surprising, since companies in those member states are often also worried about the legal systems in their country, speed of legal processes and impartiality of judges. In fact, European companies often use investment protection clauses of investment treaties between EU member states, for example in cases of expropriation.
Investment protection with Canada has been completely overhauled compared to the old-fashioned versions that exist in previous treaties. Nothing in CETA will restrict the freedom of governments to make new rules or regulations. This is laid down in various parts of the agreement, including in the chapter on investment protection. Investment protection in CETA is completely transparent, independent and the scope has been narrowed so that only businesses that have actually been badly treated could hope to win a case, such as in cases of expropriation.
This far-reaching reform of investment protection in CETA is a springboard to move towards an international solution for the problem of all the outdated clauses that exist worldwide. European member states together have around 1300 of those. By setting up a working investment court with the Canadians, we can set the right example and convince other countries to join us in working towards a true international court in the future.
Is investment protection in CETA a Trojan horse for American companies?
Businesses that are established in Canada, invest in Europe and also have real business activities there (so not just letterbox companies), can make use of CETA and so also of the investment protection clauses. This could be an American company, but also from any other country, as long as they are established in Canada.
However, the reform of investment protection in CETA means that the scope is very narrow. The ‘danger’ that a foreign company would sue a European state actually comes from all the 1300 investment agreements that member states already have. Those clauses are so vague that a letterbox company in Slovakia for example, could quite easily start a case under existing agreements. CETA is actually the best way to try to stop that from being possible, since we can use it to reform all those outdated investment protection clauses. The EU and Canada are committed to working towards modern, global rules.
Will CETA have negative effects?
In trade negotiations, negotiators try to protect sensitive sectors. Under CETA, for example, tariff lines for the European meat sector are kept in place. The total amount of pork meat that can be imported from Canada to the EU is only 0.3% of the annual EU pork consumption.
That being said, despite macro-economic benefits, a trade agreement can sometimes cause unintended and unforeseen negative effects, often on a very local scale. National governments need to make sure they take appropriate measures to deal with these, such as compensation or reschooling.
What happens next?
The European Parliament’s trade committee has now approved CETA and both the Commission, Council and the Canadian government have signed it. The full plenary of the European Parliament will vote on CETA in February. If it is approved, a large part of the treaty will enter into force provisionally, pending approval from all the European member state parliaments. The investment protection part of the treaty does not fall under European competence and will therefore not enter into force until the agreement has been ratified by all parliaments.