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Canada, EU Announce Breakthrough in Free Trade Negotiations

Monday, October 21, 2013
Sandler, Travis & Rosenberg Trade Report

Canada and the European Union announced Oct. 18 “a political agreement on the key elements” of a bilateral free trade agreement that negotiators will now use to “settle all the remaining technical issues.” The so-called Comprehensive Economic and Trade Agreement is expected to boost two-way trade by 23%, represents Canada’s biggest trade agreement ever, and according to European Commission President Jose Manuel Barroso is “a stepping stone to an integrated transatlantic market.” It is also illustrative of what may and may not be achieved in the Transatlantic Trade and Investment Partnership the EU recently began negotiating with the United States.

According to information from both sides, key elements of CETA include the following.

Tariff Elimination. Tariffs on more than 99% of all tariff lines will be eliminated, most as soon as the agreement enters into force. All industrial tariffs will be removed. By the end of transitional periods Canada and the EU will eliminate 92.8% and 93.5%, respectively, of their tariffs on agricultural goods. All tariffs on prepared agricultural products will be eliminated.

Agriculture. With respect to imports of EU dairy products into Canada and shipments of Canadian beef, pork and sweet corn to the EU, new market access amounting to a further 1% and 1.9% of tariff lines, respectively, will be granted in the form of tariff-rate quotas.

Automotive. Canada will recognize a list of EU car standards and consider recognizing others, which “will make it much easier [for the EU] to export cars to Canada.” Canada anticipates “significant increases of exports to Europe” of automobiles and auto parts by virtue of the elimination of tariffs and flexible rules of origin. These rules will grant unlimited preferential treatment to vehicles with higher Canadian content that are exported to Europe and may be adjusted if and when the EU concludes a free trade agreement with the U.S.

Non-tariff barriers. Provisions in the technical barriers to trade chapter will improve transparency, foster closer contacts concerning technical regulations, and strengthen links between the relevant standard setting bodies. A separate protocol will improve the mutual recognition of conformity assessment.

Services. CETA will create access the Canadian market in key sectors such as financial services, telecommunications, energy and maritime transport. Barriers such as citizenship or residency requirements, temporary entry restrictions, and ownership and investment limits will be reduced or eliminated.

Temporary movement of personnel. It will be easier for firms to move staff temporarily between the EU and Canada, and certain categories of professionals will have easier access to temporarily supply services such as consultancy in a variety of sectors like engineering, accounting or architecture.

Investment. CETA will remove or alleviate barriers to investment both horizontally and in specific sectors while preserving the right of each side to regulate and implement their public policy objectives. Underpinning the investment protection obligations will be a modern and effective investor-state dispute settlement mechanism.

Government procurement. According to the EU, CETA represents “the first time that all sub-federal levels of government in Canada have committed themselves to bilaterally opening their procurement markets.” Canada will also create a single electronic procurement Web site that combines information on all tenders and access to public procurement at all levels of government. CETA will expand and secure opportunities for Canadian firms to supply their goods and services to the three main EU-level institutions (the EU Commission, Parliament and Council), the 28 EU member states, and thousands of regional and local government entities within the EU.

Intellectual property rights. The EU states that CETA will “bring the Canadian protection of intellectual property closer to the level of the EU, benefitting the pharmaceutical sector and exporters of agricultural products of specific geographical origin known as GIs.” Canada will protect a list of specific GIs and will consider adding others to this list in the future.

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