Trade in Goods
The recently concluded Comprehensive Economic and Trade Agreement with Canada was negotiated over an eight-year period. The EU-Canada agreement further liberalises trade in almost all sectors.
It eliminates tariffs on all industrial products, 90 percent of agricultural products and 66% of fisheries produce. The agreement increases tariff rate quotas for agricultural and other sensitive products.
Under the EU-Canada agreement, the application of rules of origin is required. Goods traded between Canada and the EU must continue to comply with rules of origin in order to qualify for the preferential treatment under the agreement, as CETA does not comprise a customs union.
Under the EU-Canada CETA, the EU recognises Canadian assessments for some products. Many other products, such as medical devices require approval by EU authorities before the sale in the EU market.
In most sectors, individuals are not entitled to enforce rights under the agreement directly. Disputes must be raised at the governmental level.
Canada is not obliged to contribute to the EU budget.
The Agreement eliminates almost all customs duty for imports of goods originating in the EU from Canada and vice versa. 98.6% of all Canadian tariff lines and 98.7% of all EU tariff lines are fully eliminated on entry into force. All other products will have their tariffs brought to zero within three, five or seven years.
The Agreement covers almost all goods. Certain sensitive agricultural products are either excluded from the tariff reduction or are subject to special treatment.
Export duties and restrictions are generally prohibited on trade in most goods. This includes energy and raw materials for which Canada is a major producer.
Goods must continue to comply with the relevant technical, sanitary and phytosanitary rules for the protection of the consumers, the environment, and food safety. This includes, in particular, product safety, food safety, and labelling requirements.
76% of Canadian imports enjoy a “Most Favoured Nation” tariff of zero percent. Canada has agreed to reduce the remaining tariffs on entry into force of the Agreement. The EU agrees to eliminate 95% of its tariff on these products and the remainder over four, five, and seven years.
All tariff lines on industrial products will be eliminated. 99.6% are eliminated on entry into force for Canada and 99.4% for the EU. A number of automotive products are liberalised on a reciprocal basis over three, five and 17 years. Canada will remove its tariffs on ships over a 7-year period. Both EU and Canada commit to eliminating all tariffs on fishery products.
Canada has agreed that its exporters meet the preferential rules of origin rules in the EU. Canada has been granted certain derogations to facilitate its exporters meeting these rules by which a more relaxed rules of origin apply for certain products.
Fisheries and Agriculture
In respect of certain fishery products, Canada had a prior market access agreement through EU tariff rate quotas. The EU is offering further transitional duty-free tariff rate quotas. Some Canadian Provinces have export restrictions for raw fish. They are to be eliminated on entry into force of the Agreement. Some Newfoundland and Labrador are to eliminate their restrictions over three years.
Canada is to eliminate duties on 90% of agricultural tariff lines with a further element of liberalisation over seven years. The remaining products, approximately 10%, are sensitive products, which will be offered a tariff rate quota or excluded altogether.
Tariff Rate Quota – dairy;
Excluded from liberaliation -chicken, turkey meat, eggs and egg products.
Canada’s offer on processed agricultural products (including a wide range of foodstuffs) provides for the elimination of tariffs on all but a very limited number of processed agricultural products.
The existing EU-Canada wines and spirits agreement is incorporated, together with further measures to address ‘behind-the-border’ barriers preventing or hindering market access.
The EU eliminates 92.2% of agricultural tariffs increasing to 93.8% after seven years. The remaining products are those to which an entry price system applies. Sensitive products for which a zero duty but quantitatively limited tariff rate quota applied has been offered
- canned sweet corn
Sensitive products that are excluded from liberalisation of tariffs,
- chicken and turkey meat,
- egg and egg products.
Annual Tariff Rate Quotas have been agreed on some of the more sensitive products including dairy products,
- fresh beef,
- common wheat.
Some quotas are substantially increased.
There are provisions for phasing in of tariff rate quotas and quota administration.
Canada and the EU agree not to grant any export subsidies to agricultural products fully liberalised or covered by a tariff rate quota in the importing party provided the in-quota tariff has been fully eliminated.
There is no provision regarding the elimination of domestic agricultural and fisheries subsidies.
Rules of Origin
The rules of origin are based largely on the standard EU rules. However, in some sectors, this would cause Canadian exporters difficulty in meeting the more stringent EU requirements. A compromise in the form of a rules of origin derogation has been agreed for a limited period.
Canada agrees to comply with the EU rules on products when the derogation period expires. The agreement provides for cumulation of origin with third countries where both EU and Canada have free trade agreements with them. Material of the third country is taken into consideration when determining whether the product is originating under CETA.
Technical Barriers to Trade
The CETA Agreement builds on the WTO Technical Barriers to Trade Agreement. There are provisions which seek to promote transparency and foster closer contacts between the EU and Canada in the field of technical regulations. Links are strengthened between standard-setting bodies as well as testing, certification and accreditation organisations.
There is a protocol to improve recognition of conformity assessment between the parties. EU certification bodies will be permitted according to Canadian rules to certify for the Canadian market according to Canadian technical regulations and vice-versa.
CETA preserves the provisions of the WTO Sanitary and Phytosanitary Agreement. The existing EU-Canada Veterinary Agreement is integrated into the CETA. The parties agree to simplify the approval process for exporting establishments and work on further elements aimed at minimising trade restrictions in the event of an outbreak of disease.
In the area of plant health, there are new procedures to facilitate the approval of plants, fruit, and vegetables by Canada. CETA also allows for EU-wide assessment and approval procedure for fruit and vegetables. The parties agreed to establish fast-track procedures for items identified as priorities.
The Customs and Trade Facilitation chapter seeks to simplify and make customs clearance on goods more transparent. It sets common principles and policies for enhanced cooperation and the exchange of information with a view to facilitating import, export and transit requirements.
The provisions on transparency ensure that legislation, decisions and administrative policies, fees and charges are made public. New customs-related initiatives must be the subject to a right to comment before adoption.
Canada and the EU undertake to apply simplified, modern and where possible, automated procedures for the efficient and expedited release of goods. In particular, this will use risk management principles, the release of goods at the first point of arrival, simplified documentation for low-value goods and pre-arrival processing.
The EU and Canada will on request, make advance rulings on the tariff classification of goods. Each will provide an impartial and transparent system for addressing complaints by operators about customs rulings and decisions.
Annex I to the agreement lists measures and restrictions that Canada and EU wish to maintain regarding service providers and investors. No restrictions other than those listed are to apply. The market access provided through Annex I is guaranteed. Annex I measures are not subject to rollback.
Annex II lists existing measures and restrictions which the parties wish to apply but in addition reserve the right to adopt new, different or potentially more restrictive measures in the future. This applies to sensitive sectors for which parties wish to regulate economic activity.
The Annex I and II provisions constitute the most comprehensive trade agreement entered by the EU. The comprehensive listing of reservations provides transparency. It allows for the benefit of future liberalisation that Canada may undertake. Canada agrees to undertake new liberalisation in key sectors such as postal services, telecom, and maritime services.
The threshold for review of acquisition of Canadian companies by non-Canadian companies is increased to C$1.5 billion. It applies to all EU investors other than state-owned enterprises.
Canada guarantees EU financial service providers that its existing framework will not become more restrictive in relation to portfolio management services, cross-border insurance, reinsurance, and intermediation. Canada reaffirms its commitment regarding investments in financial institutions in Canada.
EU guarantees to the Canadian service providers, the current level of liberalization in many sectors through Annex I reservations.
In critical and sensitive areas, CETA safeguards the ability of the EU and States to introduce discriminatory measures or quantitative restrictions in the areas specified in Annex II. This applies in particular to public monopolies and exclusive rights for public utilities operated by the government and local government entities. Annex II reservations also apply to public services such as education, health, social services and water supply.
There are provisions for ‘Temporary Entry’ of persons to facilitate the activities of European and Canadian professionals and investors. Where investment is liberalised, inter-corporate transferees are guaranteed access. Canada and EU undertake to allow companies to post their transferees for up to three years regardless of the sector of activity. They may be accompanied by their spouse and families when temporarily assigned to subsidiaries abroad.
Natural persons, who provide a service as ‘contractual service suppliers’ or ‘independent professionals’ may stay are guaranteed the right to stay in the other party for a period of 12 months instead of six months that had applied.
There is an extensive and comprehensive set of mutually binding agreements in relation to domestic regulation. This includes provision for equitable treatment with domestic suppliers and transparency for licensing and qualification.
CETA establishes a framework for the mutual recognition of professional qualifications. It determines the general conditions and guidelines for the negotiation of profession-specific agreements in regulated professions such as lawyers. When agreements are concluded, European professionals would have their qualifications recognised by the competent authorities in Canada, and vice versa.
CETA makes provision for investment protection and investment dispute settlement. The right of governments to regulate and pursue legitimate public policy objectives such as the protection of health, safety, and the environment is confirmed.
The rule of fair and equitable treatment sets out a list of elements that are potential violations. This gives clear guidance to tribunals and prevents over expansive or abusive interpretations. There is an Annex on indirect expropriation defining what constitutes it. A measure by a public authority may be considered an expropriation, only when its effect has the same essential effect as a direct expropriation measure.
An expropriation measure may be lawful, provided it does in the public interest, and there is adequate compensation.
Non-discriminatory measures of general application taken for legitimate public objectives, such as in the field of employment, health, environment, are not expropriation unless they are manifestly excessive in light of their objective so that they amount to de facto expropriation of the investor’s property.
Disputes in relation to investment are heard by a permanent tribunal, with members no longer appointed on an ad hoc basis by the parties to the dispute. There is an appeal system equivalent to that in legal systems, whereby the decision may be subject to reverse in the event of an error of law.
CETA builds on the WTO TRIPS Agreement. There are additional provisions on copyright, trademarks and designs. There are particular provisions in respect of intellectual property rights for pharmaceuticals. Innovators holding a pharmaceutical patent may appeal marketing authorisation decisions in Canada, with no discrimination between producers of generic drugs.
Canada agrees to put in place a patent term restoration system along the lines of the EU Supplementary Protection Certificate system.
Canada agreed to strengthen its border measures against counterfeit trademark, and pirated copyright goods.
The Doha Declaration on the TRIPS Agreement on public health of 2001 is reaffirmed. The agreement does not limit the ability to export generic medicines to developing countries.
Canada has agreed that all types of food products may be protected to a comparable level to that offered under EU law. Canada has granted highest level of protection to most of the EU’s proposed list of 145 EU geographical designations of origin. In a number of instances tailor-made solutions have been found where there were conflicting trade name/ trademark issues.
Canada has guaranteed its current regime of data protection 8 years.
CETA contain substantive provisions dealing with commitments to international standards and agreements in relation to labour. This includes commitments in respect of the International Labour Organisation core standards, health and safety at work standards and implementation of the fundamental ILO Conventions.
The Agreement provides that labour and environmental standards may not be misused in a trade context as a form of disguised protectionism or by relaxing domestic labour and environmental laws. There is provision for the promotion of trade and investment practices supporting sustainable energy objectives.
The Agreement contains provisions on non-tariff barriers in relation to cars, competition, state owned enterprises, trade Defence, and good manufacturing practices on pharmaceutical products. Canada has agreed to recognise a number of UN-ECE standards accompanied by a forward looking work programme towards regulatory convergence, taking into account EU negotiations with the US.
Procurement and Public Authorities
The existing multilateral Government Procurement Agreement is expanded. The Canadian government provinces, territories and municipalities open up their procurement. CETA expands equal treatment in procurement to that which effectively already exists between the EU and Canada, in particular by extending it to sub-federal level. There are a limited number of exceptions in some areas in respect of some provinces, in Ontario and Québec, in relation to public utilities.
CETA includes a chapter on state enterprises, monopolies and enterprises granted special or exclusive rights or privileges. It is the objective to ensure the discipline of the Agreement are not circumvented and that market access is to be protected against the activities of such enterprises. The parties agree that when they operate in the market as opposed to pursuing a public interest, that they follow commercial considerations and principles of non-discrimination.
State and public authorities maintain reserve the right to resort to public monopolies or enterprises granted special rights to provide public services. They guarantee that market access reservations for public services above are not affected.