What does CETA entail? How will CETA transform the EU’s relations with Canada?

Published on 24th May 2016

On 29 February 2016, the European Commission and Canada announced the end of the legal review of the original (English) version of the Comprehensive Economic and Trade Agreement (CETA). The entire CETA agreement can now be easily accessed online. CETA is currently being translated into all EU official languages (projected completion date: July 2016). The Agreement will then be submitted to the EU Council and the European Parliament for discussion and approval. The Canadian Parliament will also vote on the ratification of CETA. The Agreement will only apply once all institutions agree.

CETA is the latest and most comprehensive international treaty between the EU and Canada. The main objective of CETA is to increase bilateral trade and investment flows between the trading partners. The abundance of raw resources available in Canada also plays a notable role in the EU’s interest in establishing closer relations. Furthermore, this cooperation significantly expands the market access for both partners and contributes to growth in times of economic uncertainty.

Breakthroughs and highlights of CETA

  • Nearly all import duties will be eliminated either upon CETA’s entering into force or gradually within 3, 5 or 7 years. For European exporters, this liberalisation implies approximately EUR 500 million in savings per year, thereby giving them the opportunity to better compete on the market. Consumers will also benefit from an expansion in choice and a reduction in prices.
  • Canadian will allow, for the first time, foreign access to sub-federal procurement. This extends beyond what Canada has offered to the US under NAFTA and represents the most comprehensive offer by Canada to a third country with respect to access to the Canadian procurement market. The EU also guarantees to Canadian suppliers reciprocal access to the European procurement market.
  • A number of EU’s high quality agricultural products will enjoy the legal protection of Geographical Indications (“GIs”). CETA also allows for the addition of GIs in the future. A total number of 145 names were granted by Canada (e.g. Bayerisches Bier, Nürnberger Lebkuchen, Prosciutto di Parma, Brie de Meaux).
  • Technical barriers to trade will be significantly reduced by the formation of a new, separate protocol for conformity assessment. EU certification bodies will be allowed to certify for the Canadian market in accordance with the Canadian technical regulations and vice-versa. The mechanism will considerably reduce the costs for testing by avoiding double-testing and simplify the process of product certification, which will benefit small- and medium-sized enterprises in particular.
  • CETA will reduce the barriers to movement of key company personnel and service-providers between the EU and Canada. A framework has been established for the mutual recognition through the EU and Canada of professional qualifications, such as those for architects and lawyers.
  • European innovations and trademarks will receive similar IP protection in Canada, which will benefit small- and medium-sized businesses in Europe. The pharmaceutical industry will also be a notable beneficiary from CETA’s IP provisions.
  • For the first time, Canada has agreed to bring both areas of trade and sustainable development within a broader sustainable development framework. The commitment to environmental protection, therefore, will be enhanced. CETA is ground-breaking in that it captures an entire spectrum of international trade and extends beyond traditional FTAs.
  • CETA will not affect the EU rules on food safety or the environment. All existing EU standards, including that for GMOs and growth hormones, will remain. Canadian producers, rather, have moved closer to the European regulations in order to enter the European market.

Investment protection and investment dispute settlement

Canada and the EU’s ability to achieve legitimate policy objectives – such as public health, safety, environment, public morals and the promotion and protection of cultural diversity – will not be derogated by CETA’s investment protection and investment dispute settlement provisions. The purpose of this section, rather, is to ensure that all investors and traders, regardless of their country of origin, will be treated equally and fairly by the governments of every country participating in CETA. A breach of “far and equitable treatment” only arises in the specified, closed set of circumstances outlined in CETA (e.g. denial of justice in criminal, civil or administrative proceedings, targeted discrimination on manifestly wrongful grounds); they constitute the limited number of cases that allow investors to bring a claim.

A permanent investment Tribunal and an Appellate Tribunal will be created to adjudicate investment disputes. A total of fifteen members will be appointed and each case will be heard in divisions of three randomly selected members. The decisions of the Tribunals as well as the parties’ documents will be made publicly available on a United Nations website, thus ensuring full transparency in investment dispute settlement proceedings. Interested parties such as NGO’s, country states and trade unions will also be permitted to make submissions.

The Tribunals will only have the power to examine the laws of the EU, a Member State or Canada as a matter of fact and cannot order a repeal of a legal measure. The trading partners will continue to have complete autonomy and sovereignty in the area of regulation. The most that can be required of a country is compensation and this is limited to the level of the losses actually suffered. Punitive fines are also precluded under CETA.

Relationship between CETA and TTIP

Although the lessons learned during the CETA discussions may inform and aid the TTIP talks, CETA and TTIP remain to be two separate agreements with two different partners. Furthermore, the EU’s economic relations with the US vary significantly from that with Canada and in many respects, the EU and Canada are relatively more like-minded. An interconnection between CETA and TTIP exists, nevertheless, as CETA explicitly includes considerations and adaptations for future agreements between Europe and North America. CETA is not a blueprint for TTIP but the two Agreements will most likely complement and reinforce one another.

Interested in hearing more from Osborne Clarke?

* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

Connect with one of our experts

Interested in hearing more from Osborne Clarke?