A closer look at CETA, part 5: Looking ahead at CETA’s impact

Angela Parkin, Manager, Trade Compliance Today I’d like to wrap up our five-part series on CETA by taking a look at how CETA and the North American Free Trade Agreement (NAFTA) will affect each other once CETA comes into effect. I’ll also offer a look ahead at what CETA means to Canada and the EU.

NAFTA, CETA, and working with both agreements

Naturally, both NAFTA and CETA are two separate agreements with their own regulations, but Canadian companies could be in a position to take advantage of both agreements. For example, a business could use NAFTA to import materials from the U.S. or Mexico to manufacture a product in Canada and then apply CETA when exporting the finished product to the EU on a duty-free basis. However, if a manufacturer ships the finished product to the U.S., then decides to export the product from the U.S. to the EU they will lose the benefits of the lower tariffs into the EU. Canadian manufactures with consolidation centers for repair services in the U.S. may also lose out on the benefits of CETA, such as on goods repaired in Canada but returned to a consolidation area in U.S.

It will be imperative for Canadian businesses to work closely with their customs and trade providers to ensure they’re making the most of both NAFTA and CETA, and not missing out on any opportunities the two agreements may provide.

Looking ahead: Focusing on CETA’s benefits

Some organizations on both sides of the Atlantic are in opposition to the CETA agreement, stressing corporate rights, lowering environmental standards, and labor rights or weakening public services. However, the CETA agreement will open new markets to both Canadian and EU exporters, and will generate significant benefits in many areas, including preferential tariffs, product content rules, increased access to both markets and fair trading environment between Canada and the EU.

While the U.S. market is very important to Canadians, statistics show there has been little growth in this market for Canada for the past decade and Canada must look at other market opportunities, if it wishes to have the assurance of economic growth. CETA is expected to be a template for the Transatlantic Trade and Investment Partnership (T-TIP) agreement between the EU and U.S. and while the negotiations for this agreement are in the early stages, the CETA template is expected to provide benefits in expediting the T-TIP negotiations.

Canada and the EU will experience some challenges in completing the ratification process over the next year or so, both parties are anxious to conclude this agreement and have expressed they are working forward to an implementation date in early 2015. While it might be a challenge for both parties to meet this date, 2015 is the goal they are committed to achieving.

As both parties finalize the agreement over the coming year, importers and exporters should use this time as an opportunity to review their supply chain strategy and work with their logistics service providers and compliance experts to determine the benefits that can be obtained from CETA.

Check out the other installments in our CETA series:
Part 1: Presenting new opportunities for Canadian and EU businesses
Part 2: Automotive sector to feel CETA’s impact
Part 3: Tariff reductions to benefit chemical, telecom industries
Part 4: Investment, labor, and geographical indicators