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Business, Commercial and Corporate

CETA, a competitive advantage for Canadian businesses

At a time when the United States has withdrawn from the Trans-Pacific Partnership and Canada and Mexico are facing numerous threats from President Trump to withdraw from NAFTA, the time has come for the liberalization of markets between Canada and the European Union.

After almost ten years of prepatory work and official negotiations, the Comprehensive Economic and Trade Agreement (CETA) provisionally enters into force today, September 21st, 2017, while waiting for further ratification by many European Union member states. Until it is fully ratified, most of its terms will still apply to Canada and the European Union as of today.1 This agreement constitutes the most considerable bi-lateral trade agreement Canada has signed since NAFTA. After all, the European Union is the second largest world market for imports and Canada’s second largest commercial partner. It is no doubt that CETA constitutes an interesting and unprecedented business opportunity for the economic development of Canadian businesses who will be able to access the markets of the 28 European Union member states consisting of approximately 500 million consumers.

CETA represents a veritable competitive advantage for Canadian businesses, among other things, by improving export conditions, opening new markets and eliminating or reducing barriers to trade. One of the significant advantages of CETA is that 98% of tariff lines applicable to Canadian merchandise imported into the European Union are eliminated as of today. Prior to CETA’s provisional application only 25% of tariffs lines were duty exempt.

Canadian producers, manufacturers, and exporters in twelve sectors of the Canadian economy will be able to benefit from this new agreement, namely, the aerospace, agricultural and agri-food, automotive, clean-tech, fish and seafood, forestry and wood products, information and communications technologies, infrastructure, medical devices, metals, mining, and minerals, oil and gas, and pharmaceutical industries. All of these sectors include key exports from Quebec, including the vast market of manufactured goods, metals and mineral products.

Moreover, CETA’s rules of origin take into account current procurement and sourcing methods used by Canadian and European businesses, which, according to the Canadian Government may potentially allow for third-party countries whom the EU and Canada currently have free-trade agreements to be brought into one single free-trade area.

Exchanges between Canada and the European member states are also facilitated through the implementation of measures to improve border processing delays, simplify or automate customs procedures and establish a transparent and impartial review mechanism for customs decisions.

Through the provisions on regulatory cooperation established in CETA, it will equally be possible for Canadian products to be tested and certified in Canada under European regulations. Under CETA, products entering the EU must still comply with EU regulatory standards. However, Canadian products may now be certified under European Union regulatory standards in Canada, which facilitates product certification for goods exported by Canadian businesses.

Furthermore, CETA also facilitates the cross-border movement of qualified professionals, technologists, business people, and investors temporarily staying in the European Union or transferring temporarily within a business operating in Canada and the European Union. Canadian businesses will profit from greater certainty in regards to the creation of European subsidiaries and the installation, maintenance, and after-sale service offered in the European Union. The costs related to the export of merchandise will also be reduced and better foreseeable.

With certain exceptions, Canadian businesses will also have privileged access to public markets in the European Union. CETA permits Canadian businesses to bid on European calls for tender from municipalities, schools, universities, hospitals, public sector business and central governments, and this on a level playing field with their European counterparts. Furthermore, certain minimal thresholds requiring calls for tender in relation to the provision of goods and services by Canadian businesses have been lowered by the adoption of CETA.

According to a study done by Canada and the European Union in 2008, we can anticipate an annual increase of Canada’s GDP by 0.77%, 2.2 billion dollars of economic benefits for Quebec, and the creation of 16,000 new jobs. The free movement of professionals, the opening of certain markets, and the strengthening of Canada’s economic relations, and the stimulation of the Canadian economy are only some of the benefits that the provisional application of CETA will provide. The professionals at Therrien Couture are following CETA closely and are here to discuss its advantages and its provisional application. We will also keep you updated as CETA as ratified by the various European Union member state parliaments, a process which could be lengthy.

Altogether it is undeniable that this new agreement will position Canada and Quebec in the forefront of international commerce creating new opportunities for Canadian businesses, companies looking to create Canadian subsidiaries, and investment in Canadian markets.

This article was written with the collaboration of Christopher Jackson, lawyer.

1Belgium has requested an opinion from the European Court of Justice on the dispute resolution mechanism system in CETA to see if it is compatible with European law. Until a decision has been rendered these sections will not be provisionally applied.