CETA: what are the next steps?

Legislation | | MIC Customs Solutions |

Following protracted negotiations, the EU and Canada have put pen to paper on the Comprehensive Economic and Trade Agreement, with attentions now turning to how the implementation process will work.

On October 30th 2016, leaders from the European Union and the government of Canada were finally able to put pen to paper on the Comprehensive Economic and Trade Agreement (CETA), one of the most significant free trade agreements (FTAs) in the history of either region.

The broad-ranging deal, which the EU has described as its most advanced and progressive trade agreement to date, was pushed through in the face of political opposition that had at one point threatened to derail the entire process. Now that it has been signed, European and Canadian companies stand to benefit from a more transparent and less bureaucratically burdensome trading environment.

With the CETA negotiations now at an end, businesses will be keen to see the deal implemented as efficiently as possible, in line with the timescales outlined by European and Canadian ministers, to allow them to take advantage of tariff-free cross-border trading at the earliest opportunity.

The current state of play

As with many recent FTAs, CETA has come up against stiff opposition from a number of quarters, due to concerns about the potential it has to skew the market in favour of bigger businesses, as well as its possible impact on certain sectors.

These concerns came to a head when the Belgian region of Wallonia threatened to block the signing of the deal, which it was able to do, as the Belgian federal government required unanimous support from all of its main regions to sign off on CETA. However, a compromise was subsequently reached that allowed the agreement to be signed.

Having originally commenced negotiations in 2009, both the EU and Canada are keen to put CETA into effect as soon as possible, with Canada's minister of international trade Chrystia Freeland tabling the treaty and introducing legislation in Canada's House of Commons on October 31st to move ahead with the FTA's implementation.

On introducing the bill to implement CETA, Ms Freedland said: "This is a gold-standard agreement that paves the way for a new generation of trade agreements that prioritize public services, environmental protection and labor rights."

What happens next?

The tabling of CETA for discussion by the Canadian parliament is expected to result in the deal being enshrined in law during 2017, though it remains subject to all stages of the country's legislative process.

In Europe, the process is more involved, as the European Parliament must now give its consent to CETA for it to enter into force provisionally. At this stage, businesses and consumers will begin to be affected by its stipulations, ahead of its formal introduction.

The plan to introduce a new Investment Court System (ICS) to provide a unified approach to investor/state dispute settlement poses something of a unique challenge, as public debates on this issue remain ongoing in many countries. As such, the EU's member states have decided that ICS will not be included within the scope of any provisional implementation of CETA, and will only be introduced once all the relevant national ratification procedures have been completed.

During this time, the European Commission has agreed to work with Canada to thrash out further details of how the parameters of the new system will work, a discussion that will include key issues such as the selection of judges, how smaller businesses will access the new system, and how the appeal mechanism might function.

The expected benefits

With the implementation of CETA, 99 per cent of tariffs on EU-Canadian trade will be scrapped, in most cases as soon as the deal comes into effect. This means that from the first day of its introduction, €400 million of duties on goods originating in the EU will be removed by Canada, rising to more than €500 million a year at the end of the transitional period.

With Canada also gaining better access to more than 500 million EU consumers, the benefits of the FTA are expected to be widespread. The EU cited a similar deal with South Korea introduced in 2011 as a precedent, noting that the pact has seen EU exports to South Korea increase by more than 55 per cent in the years since.

European commissioner for trade Cecilia Malmstrom said: "Through our agreement with Canada, we build a bridge to one of our closest allies, making a real impact for our exporters, entrepreneurs and employees.

"Trade simply works, and we know it from experience. When we get rid of unnecessary costs and overlapping bureaucracy, companies will try out new markets and hire more people."