CETA: Hurry Up and Wait … But be Ready!

For some time now the Comprehensive Economic and Trade Agreement (“CETA”) between Canada and the European Union (“EU”) has felt somewhat like a mirage: a refreshing source of economic stimulation in a difficult environment sitting almost within grasp on the horizon but yet which moves away as you try to approach it.

Initiated in 2008 by the Canadian government at the urging of the province of Quebec and quickly supported by several other provinces and territories, CETA was conceived to allow Canada and the EU to develop closer economic ties in response to the stalled Doha Round of talks at the World Trade Organization. The results of an initial feasibility study1 released in 2008 were very encouraging: a 20% increase in bilateral trade was anticipated representing an injection of some 12 billion dollars per year into the Canadian economy brought welcome news to our business community since 60% of Canada’s GDP is based on international trade and one out of every five (5) Canadian jobs results from this sector.

The news was all the better that, at the time, Canada was eager to achieve greater diversity in its international trade as China was beginning to displace Canada in the US market and the EU was after all the world’s largest economy with its some 500 million people and its 27 member states. In addition, the EU represented Canada’s second most important goods trading partner as well as its second most important investment partner and any new agreement with the EU would form an effective complement to NAFTA which was expected to go even further than NAFTA in its terms and scope.

Despite the hardships in the EU following the 2008 financial crisis, the goal remained attractive notwithstanding some daunting challenges. Among other things the EU made it clear that a key component to any agreement would be acceptable access to all Canadian markets in the public sector (whether federal, provincial or territorial): this would therefore involve provincial and territorial participation in a federally negotiated trade agreement and the sometimes complicated dynamics which that involves in our federal system. To this complexity were added the fears arising over loss of provincial (including municipal) and territorial autonomy over local economic stimulation resulting from such access. Other sectors of CETA posed similar challenges. Through the dedication and hard work of trade officials on both sides (and despite some slippage in what was nevertheless a very ambitious timetable, the text of an agreement was finally hammered out and announced in August 2014).

As announced, CETA was indeed comprehensive and covered:

  • trade in goods;
  • investment services and related matters;
  • government procurement;
  • intellectual property;
  • dispute settlement;
  • sustainable development, labour and environment; and
  • institutional and horizontal provisions.

There remain now some technical issues regarding the legal “scrubbing” of the text and its translation into some 23 treaty languages and, most importantly, the process of ratification by all 28 EU countries. In the push towards conclusion of CETA closer scrutiny on the EU side, however, has raised concerns over provisions allowing private investors to bring claims against governments who cause them prejudice by failing to respect the provisions of the Agreement. These types of provisions, particularly familiar to Canada since the adoption of NAFTA, have raised concerns in the EU both as to the form of the dispute resolution and, more importantly, as to the fundamental threat to national economic sovereignty they imply. It was not clear, in particular to certain German observers, that for example a Canadian investor injecting a significant amount of funds into a project in the EU based on rights granted under CETA should enjoy a right of action if those rights were not respected2. It has also been noted that another difficulty standing in the way of speedy European ratification is the current absence of a European statesman to act as a “Champion” of CETA3 as other priorities such as most recently the Greek financial crisis and serous refugee and immigration emergencies demand immediate attention from the various leaders in the EU.

As the glow comes off our Canadian economy with the recent announcement of a recession there is greater interest than ever to implement CETA and to enjoy its benefits. The most difficult work has been completed – access by EU suppliers to Canadian public procurement has been granted substantially as requested with broad support from the provinces, territories and municipalities and moreover other issues have been resolved with pragmatic solutions and compromises. Although it may be difficult to say when CETA will be ultimately ratified, it appears clearly in the interests of all parties that ratification now occur.

With that perspective in mind, Langlois Kronström Desjardins presents an analysis of two important components of CETA: in this issue of our Infolettre, the intellectual property provisions are considered and, in the following issue of our Infolettre, the provisions concerning government procurement will be presented. Significant changes and opportunities are found in each case and it is never too early to start getting prepared.

1 Assessing the costs and benefits of a closer EU- Canada economic partnership: http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/eu-ue/study-etude.aspx?lang=eng
2 The availability of such claims, where founded, is generally understood in North America to be a necessary protection underlying the business decision to make such investments. It is instructive for comparison purposes to consult the limited number of current and decided claims (as well as those withdrawn or inactive) under Chapter 11 of NAFTA – see: http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/disp-diff/gov.aspx?lang=eng].

3 By way of comparison the adoption of NAFTA benefited from the strong support of Ronald Reagan. It is true, however, that the amount of trade involved was significantly higher: the amount of Canada – EU trade is roughly $85 billion per year (compared to an amount of roughly $2 billion per day between Canada and the US.

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