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CETA explained

 

Creating new opportunities for your business

The Comprehensive Economic and Trade Agreement, or CETA, is a trade agreement between the EU and Canada.

By boosting trade between us, CETA will create jobs and growth – and new opportunities for your business. Canada is a large market for Europe's exports and a country rich in natural resources that Europe needs.

CETA is also progressive. It goes beyond just removing customs duties, by taking people and the environment fully into account. By doing so, it'll set a new global standard for future trade agreements.

What will CETA do?

CETA will:

  • remove customs duties
  • help make European firms more competitive in Canada
  • make it easier for EU firms to bid for Canadian public contracts
  • open up the Canadian services market to EU companies
  • open up markets for European food and drink exports
  • protect traditional European food and drink products (known as Geographical Indications) from being copied
  • cut EU exporters' costs without cutting standards
  • benefit small and medium-sized EU firms
  • benefit EU consumers
  • make it easier for European professionals to work in Canada
  • allow for the mutual recognition of some qualifications
  • create predictable conditions for both EU and Canadian investors
  • make it easier for European firms to invest in Canada
  • help Europe's creative industries, innovators and artists
  • support people's rights at work and the environment.

With CETA, the EU and Canada pledge to ensure that economic growth, social issues and environmental protection go hand in hand.

What benefits will come from removing customs duties?

CETA will benefit European companies by getting rid of 99% of the duties (taxes) they have to pay at Canadian customs.  The same will apply to Canadian businesses exporting to the EU.

Most customs duties will end as soon as CETA comes into effect.  After seven years, all customs duties on industrial products will disappear.

From day one, Canada will remove customs duties on EU exports worth €400m every year, rising to €500m a year at the end of phase-in periods.  This will make Europe's exports more competitive on the Canadian market.

European firms will also benefit from cheaper parts, components, and other inputs from Canada which they use to make their products.

How will CETA make European firms more competitive in Canada?

CETA will help European firms compete in Canada by:

  • removing customs duties, which will lower the price Canadians have to pay for European goods
  • ending the need for expensive double testing is some areas
  • making it easier for them to send maintenance engineers and other specialists to provide:
    • after-sales and related services
    • support for equipment, machinery and software they sell there.

Will EU firms be able to bid for public contracts in Canada?

Yes.  This is one of the big gains for EU businesses from CETA. In fact, Canada has opened up its government tenders to EU companies more than with any of its other trading partners.

EU firms will be able to bid to provide goods and services at federal, provincial and municipal level – the first non-Canadian firms to be able to do so.  This is important because Canada's provincial public contracts market is worth twice as much as the federal one. In total, Canada's public authorities buy goods and services worth billions every year.

Canada has also agreed to make the tendering process more transparent by publishing all its public tenders on a single procurement website.  Access to information is one of the biggest obstacles for smaller companies in accessing overseas markets, so this will help smaller businesses in Europe.

How will CETA open up the Canadian services market?

In services and investment CETA is the most far reaching agreement the EU has ever concluded. 

Half of the EU's economic growth from CETA is expected to come from more trade in services.

European firms will have more opportunities to provide services, such as specialised maritime services like dredging, moving empty containers, or shipping certain cargo within Canada.

In sectors such as environmental services, telecoms and finance, European firms will be able to access Canada's market at both federal and – for the first time – provincial levels.

CETA doesn't cover public services, so:

  • EU Member States will be able to keep public monopolies
  • CETA won't force governments to privatise or deregulate public services like the water supply, health or education
  • EU Member States will continue to be able to:
    • decide which services they want to keep universal and public and
    • subsidise them.

What opportunities will CETA offer to farmers, food producers and makers of Europe's traditional food and drink products?

Many customs duties on farm produce, processed foods and drinks will disappear.  Europe will be able to export nearly 92% of its agricultural and food products to Canada duty-free.  European exports to Canada's market of high-income consumers will become cheaper. 

This will create new export opportunities for EU farmers and producers of:

  • wines and spirits
  • fruit and vegetables
  • processed products
  • cheese
  • Europe's traditional specialities (known as 'geographical indications').

In areas such as wines and spirits, CETA will also remove other barriers to trade.  This will make it easier for EU exporters to access the Canadian market.

Removing customs duties will give the EU food processing industry better access to Canadian fish.  In parallel to lifting customs duties, the EU and Canada will develop sustainable fisheries in parallel by:

  • monitoring
  • control and surveillance measures
  • fighting illegal, unreported and unregulated fishing.

CETA will help both sides export agricultural products. 

Under CETA, Canada has agreed to protect 143 Geographical Indications (GIs) – distinctive food and drink products from specific towns or regions in the EU.  They include things like Roquefort cheese, balsamic vinegar from Modena and Dutch Gouda cheese.

Many of these products are among the EU's top EU food and drink exports.  Producers are often small or medium-sized businesses in rural communities.

Canada will protect these traditional European products from imitations in much the same way as the EU does.  So, for example, cheese sold in Canada as Gouda will have to come from Gouda.

There'll be limited quotas for a few sensitive products such as beef, pork and sweetcorn for the EU and dairy products for Canada.  CETA won't open up the market for poultry or eggs in the EU or Canada, and it'll respect the EU's entry-price system.

All imports from Canada have to meet EU rules and regulations.  For example, only hormone-free meat will ever be imported into the EU.

How will CETA cut companies' costs without cutting corners on standards?

CETA would help cut costs for EU firms that export to Canada, especially smaller ones, in another way, too.

It involves so-called conformity assessment certificates. These prove that a product has been tested and meets:

  • the relevant technical rules and regulations and
  • any health, safety, consumer protection or environmental standards that also apply.

The EU and Canada have agreed to accept each other's conformity assessment certificates in areas such as:

  • electrical goods
  • electronic and radio equipment
  • toys
  • machinery
  • measuring equipment.

This means that, under certain circumstances, a conformity assessment body in the EU can test EU products for export to Canada according to Canadian rules and vice versa.

So, for example, an EU firm that wants to sell a toy in Canada will only need to get its product tested once, in Europe, where it can already obtain a certificate valid for Canada.

This will avoid both sides doing the same test and could greatly cut costs for both companies and consumers.

It will particularly help smaller companies for whom paying twice for the same test can put them off exporting altogether.

Under CETA, the EU and Canada will also set up a voluntary Regulatory Cooperation Forum, made up of specify members. The Forum will:

  • enable regulators to exchange experiences and information
  • help identify areas where regulators could work together
  • provide help and make suggestions to regulators and legislators.

The Regulatory Cooperation Forum won't:

  • be able to change existing regulations
  • develop new legislation
  • have any decision-making powers
  • restrict the decision-making power of regulators in the EU's Member States or at EU level.

How will small and medium-sized firms (SMEs) benefit?

CETA will benefit small and medium-sized firms by:

  • removing customs duties
  • making it easier for them to bid for contracts in Canada's government
  • eliminating expensive double testing is some areas
  • strengthening copyright protection
  • ensuring copies of traditional European food and drink products aren't sold as the genuine article.

How will consumers benefit?

Opening markets has the potential to keep prices down and give consumers more choice.

But free trade doesn't mean lowering or changing EU standards that protect people's health and safety, social rights, their rights as consumers or the environment.

We're not going to change these standards. Imports from Canada will still have to satisfy all EU product rules and regulations – without exception.  

So CETA won't change how the EU regulates food safety, including on GMO products or the ban on hormone-treated beef.

Will it be easier for EU citizens to work in Canada?

Yes, in some cases.

CETA will make it easier for company staff and other professionals to work on the other side of the Atlantic, and for firms to move staff temporarily between the EU and Canada.

This will help European companies run their operations in Canada. 

It will be also easier for other EU professionals to temporarily supply legal, accounting, architectural or similar services.

How will mutual recognition of qualifications work?

CETA provides a framework for the EU and Canada to recognise each other's qualifications in regulated professions such as architects, accountants and engineers.

Professional organisations in the EU and Canada will be able to jointly work out the details for recognising each other's qualifications.

The authorities in the EU and Canada will then approve their work and make it law.

How will CETA make it easier for European firms to invest in Canada?

CETA is the first EU trade agreement that offers benefits to EU companies investing outside the EU.  It will make it easier for European firms to invest in Canada. 

CETA will:

  • remove barriers for EU firms wanting to invest in Canada.
  • ensure all European investors in Canada are treated equally and fairly
  • improve the investment climate and offer more certainty to investors by:
    • not discriminating between domestic and foreign investors
    • not imposing new restrictions on foreign shareholdings.

How will CETA protect investments?

Many EU countries have in the past negotiated agreements which include a mechanism for resolving disputes between governments and investors known as investor-state dispute settlement (ISDS). CETA replaces this with a new and better Investment Court System (ICS).

CETA:

  • contains measures to protect investments
  • enshrines the right of governments to regulate in the public interest, including when regulations affect a foreign investment.

The new Investment Court System will:

  • be public
  • not be based on temporary tribunals
  • have professional and independent judges
    • appointed by the EU and Canada
    • held to the highest ethical standards through a strict code of conduct
  • work transparently by
    • opening up hearings to the public
    • publishing documents submitted during cases.

CETA will:

  • limit the grounds on which an investor can challenge a State
  • prevent public bodies from being forced to change legislation or pay damages.

In many EU Member States public debate is continuing about how to protect investments.  So EU governments, supported by the European Commission, have agreed that they will only put the Investment Court System into practice once all EU countries have finished their national ratification procedures.

In the meantime, the Commission will work with Canada on the details of the new system, like how to:

  • select judges
  • ensure small and medium-sized firms can use the new system and the appeals mechanism.

How will CETA help Europe's creative industries, innovators and artists?

CETA will help level the playing field between Canada and the EU in the area of Intellectual Property Rights (IPR).   European musicians, artists, and others working in Europe's creative industries will be properly rewarded for their work.

CETA will:

  • strengthen copyright protection by bringing Canada's rules in line with EU laws for protecting new technologies and managing digital rights
  • improve the way Canada's IPR system protects patents for EU pharmaceutical products
  • strengthen enforcement
  • strengthen Canada's border measures against:
    • counterfeit trademark goods
    • pirated copyright goods
    • counterfeit geographical indication goods. 

How will CETA affect people's rights at work and the environment?

In CETA the EU and Canada reaffirm their commitment to sustainable development.

Both agree that more trade and investment should strengthen, not weaken, environmental protection and labour rights.

The EU and Canada want CETA to help ensure that economic growth, social development, and environmental protection reinforce each other.  So CETA includes the EU's and Canada's obligations under international agreements on workers' rights and environmental and climate protection.

When it comes to implementing the EU's and Canada's commitments in these areas, CETAgives a strong oversight role to EU and Canadian civil society – business associations, trade unions, consumer bodies , environmental groups and other non-governmental organisations (NGOs).  

CETA also sets up a process for settling disputes, including government consultations and a panel of experts.

What's the Joint Interpretative Instrument?

When they signed CETA, the EU and Canada also signed a Joint Interpretative Instrument. It further clarifies what the EU and Canada have agreed in CETA.  The document will have legal force.

It covers areas such as:

  • the new Investment Court System
  • governments' right to regulate in the public interest
  • public services
  • labour rights and environmental protection.

What kind of agreement is CETA – EU-only or mixed?

In certain international agreements, the EU has so-called 'exclusive competence'. EU governments task the European Commission, the EU's executive arm, with negotiating and concluding such agreements. Such agreements are therefore 'EU-only.'

In other agreements the EU has so-called 'shared competence'. Both the EU institutions and EU governments conclude the agreement. So it is a 'mixed' agreement to which EU countries must give their consent.

The Commission's legal assessment is that CETA is an 'EU-only' agreement - the areas that it covers fall entirely within the EU's competence, rather than jointly between the EU and its Member States ('mixed').

The Court of Justice of the EU is currently examining the exact scope of the EU's common commercial (trade) policy. It will give its opinion soon and offer further guidance. Until it does, the EU must move on and deliver on its trade policy.

That's why the Commission decided to propose CETA for signature as a mixed agreement. In that way EU countries can quickly apply it on a provisional basis those parts of the agreement which concern trade ('provisional application').

What happens next?

Now that the EU and Canada have signed CETA, the deal still has to go through two main stages of democratic oversight before it comes fully into force.

At the first stage, the European Parliament must give its consent to CETA for it to apply provisionally.

The second stage involves parliaments in EU countries. Only once they approve the agreement does CETA come fully into force.

What is provisional application?

An EU-only agreement enters into force straight after the European Parliament gives its approval.

But mixed agreements enter into force only once each individual EU country has approved it. Each country's approval procedures may take several years, so in the meantime EU governments can decide in the EU Council to provisionally apply the agreement ('provisional application').

Provisional application ends after all EU Members notify the Council that they have completed their internal ratification procedures. Only then can CETA fully enter into force.

Which parts of CETA will the EU provisionally apply?

The EU will provisionally apply most parts of CETA.

The main exclusions from provisional application are:

  • investment protection
  • investment market access for portfolio investment (but market access for foreign direct investment is an exclusive EU competence)
  • the Investment Court System
  • an article on camcording

 

 

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