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News, 11/13/2013

Benefits of the free trade agreement between the EU and Canada

On 18 October 2013, the European Union and Canada reached a political agreement on the key elements of a free trade agreement. The agreement will be the most ambitious trade agreement that the EU has ever reached. Tariffs on industrial products in bilateral trade between the EU and Canada will be removed altogether, which will bring European companies annual savings amounting to EUR 500 million. Canadian provinces and municipalities will open up their tendering processes to European companies.

The Comprehensive Economic and Trade Agreement (CETA) between the EU, its Member States and Canada is expected to increase two-way bilateral trade in goods and services by EUR 26 billion and boost the EU gross domestic product by approximately EUR 12 billion a year. Once in force, the agreement will have major impacts on the economic growth and employment in both the EU and Canada. The agreement will also make it easier for Finnish companies to operate in the Canadian markets.

Practically all import tariffs will be removed

The agreement will significantly lower the tariffs on trading in goods between the EU and Canada, removing import tariffs on 99 per cent of goods in the tariff nomenclature. Tariffs will be removed altogether on industrial products and fishing products. As regards agricultural products, 93 per cent of import tariffs will be removed in Canada and 96 per cent in the EU. Sensitive products – which in case of Canada mean dairy products and in case of the EU beef, pork and sweet corn – are an exception. For these products, markets will be opened up by means of tariff rate quotas, which means that an agreed volume of, for example, beef can be imported at a lower tariff.

Most of the tariff reductions will be implemented immediately after the entry into force of the agreement and the rest no later than within seven years. As regards, for example, industrial products, a longer transition period has been agreed for motor vehicles.

Access to the tendering processes in the Canadian public procurement market

From the EU perspective, one of the most important achievements of the trade agreement is related to public procurement. The commitments made by Canada to the EU are more extensive than those made to any other trading partner. Therefore, public procurement in Canadian provinces and municipalities will become open to European companies to engage in tenders. Canada will also establish an electronic procurement site where information on all ongoing tendering processes will be collected. In addition to federal government, it will also cover procurement at the sub-federal and local levels of government.

Negotiations on investments and services continue

Making trading in services and investments activities easier is one of the areas of the agreement on which negotiations on the details still continue. The purpose of the agreement is to boost economic growth by increasing the willingness of the companies and investors of both parties to engage in business and make investments in each other’s area.

It has been estimated that about one-half of the benefits of the agreement will result from free trading in services. The agreement will enhance the opportunities of European companies in the sectors of, for example, financing services, communications, energy services and maritime transport; and make temporary personnel transfers between the EU and Canada easier.

Investment protection and the international settlement of disputes system related to that are also measures aimed at increasing economic activity by dispelling concerns related to violations investments made under laws and regulations are subjected to.

Enhanced cooperation

The trade barriers encountered by Finnish companies in the Canadian market are often related to the fact that the technical regulations, standards or inspection, testing and certification requirements differ from the requirements and procedures applied within the EU. The agreement will enhance the cooperation between the EU and Canadian authorities for removal of such trade barriers and avoiding creation of new ones.

The EU and Canada have also agreed on certain health and plant protection measures which will make approval of European products easier in Canada. The agreement also includes provisions on protection of key intellectual property rights and geographical indications. In addition, as regards the regulations on working life and the environment, it has been agreed that implementation of the regulations will be monitored with the civil society contributing to the process.

The CETA negotiations were launched in May 2009. The objective is to have the final details settled by the end of 2013, after which the text will undergo legal review. Once the technical part of the process is completed, the agreement needs to be adopted by the EU Member States and the European Parliament. The ambitious goal of the European Commission is to have the agreement enter into force as early as at the first part of 2015.

Additional information: Jukka Pesola, Head of Trade Policy Unit, tel. +358 295 351 029; and Mary-Anne Nojonen, Commercial Counsellor, tel. +358 295 351 494

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Updated 11/13/2013

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