The Comprehensive Economic & Trade Agreement (CETA) between Canada and the European Union is a landmark free trade agreement that eliminates 98% of tariffs on goods and services traded across the Atlantic and establishes a mutual framework for regulatory cooperation and the recognition of professional qualifications and certifications.
After seven years of negotiation that dealt with a number of contentious issues and some last-minute dealing making, CETA was ratified by the Canadian government and the European Parliament in early 2017 and officially came into effect on a provisional basis on Sept. 21, 2017.
CETA allows businesses in Canada to access a market of 500 million people across the EU’s 28 nations and offers Europeans access to tariff-free imports of Canada’s natural resources, such as forestry, metals, fish, as well as oil and gas.
In addition to eliminating tariffs, CETA breaks down barriers to trade in services, allowing service providers in both entities to compete in each other’s markets, including bids on public-sector projects at both the federal and sub-federal level. The agreement also liberalizes labour mobility by harmonizing the recognition of professional credentials across both markets. This is particularly advantageous to Canadian businesses as the EU is the largest purchaser of foreign services in the world, importing $936 billion in services in 2015.
CETA was designed to break down trade barriers to help businesses on both sides of the Atlantic make the most of their trade relationships. However, both Canada and the EU are unique and complex markets, each with its own varying economic and market conditions, regulatory policies and frameworks and regional considerations.
For Canadian businesses, particularly those accustomed to trade with the U.S. through NAFTA, CETA offers an opportunity to diversify trade opportunities and partnerships. However, trade with the EU brings with it new considerations for Canadian businesses, including transporting higher volumes of goods through sea freight, catering to the linguistic and cultural nuances of the EU market and navigating the logistical infrastructure of the continent.
For EU businesses, Canada has its own forms of diversity, including disparate provincial regulations and inter-provincial trade barriers, which can complicate export on a national scale. The country’s vast geography, topography and weather patterns mean new considerations for European businesses interested in exporting.
The advantages CETA offers are currently being made available on a provisional basis. That means that while European and Canadian businesses can make use of CETA, the agreement must still be ratified by the various governing bodies of the EU’s member states before it can be applied in full. While it is highly unlikely CETA won’t be ratified by one of these legislative bodies, the possibility does remain and poses a certain level of risk to foreign investors.
The United Kingdom’s anticipated exit from the European Union is currently being negotiated between the UK and EU. The terms of the so-called Brexit are still in the proposal stage and are unlikely to be solidified for some time. What is certain, however, is that the UK will break from the EU on October 31, 2019. The terms by which the Brexit takes place will have a direct effect on supply chains involving both the EU and UK. This presents challenges for those businesses who use the UK as a point of entry into Europe or point of exit from Europe.
Where There’s Risk, There’s Reward
Creating new relationships with vendors, distributors, suppliers and retailers overseas and establishing new supply chains may seem a daunting task. However, businesses in both Canada and the EU have an opportunity to take advantage of new, open markets to realize cost efficiencies, identify new sales opportunities, establish effective, integrated supply chains and expand their global reach. In short, the rewards far outweigh the risks, and Livingston can help simplify trade and make sense of CETA’s complexities so that business decision makers can focus on what they do best.
Livingston International has unparalleled expertise in navigating the intricacies of free trade agreements. Through our consulting and compliance work we help companies prevent delays at international borders, avoid unnecessary costs associated with non-compliance and ensure they have adequate cash flow. Our team of experts can help companies identify risks and opportunities to assist them in achieving success in new markets.
Our Experts Speak on CETA
Livingston’s subject matter experts have been closely monitoring CETA’s progress and have been offering perspective and counsel along the way. Below is a sample of our experts’ published articles on CETA and its associated risks and opportunities for business.
EU Provides Canada Alternatives Amid NAFTA Uncertainty by Candace Sider, vice president of regulatory affairs, North America
Brexit Has Big Implications for Canadian Trade by Cora Di Pietro, Vice President of Global Trade Consulting at Livingston International
Hold The CETA Celebration: There’s A Lot in The Way To Stop Us Cementing the Canada-EU Deal by Candace Sider, vice president of regulatory affairs, North America
Changes in Canada-EU Trade Patterns Could be on the Way by Cora Di Pietro, Vice President of Global Trade Consulting at Livingston International
If Past Data Is Any Indication, Canadian Businesses’ Likely Won’t Leverage CETA To Its Fullest Potential by Candace Sider, vice president of regulatory affairs, North America
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