CETA: what comes next and the benefits for companies
The free trade agreement between the European Union (EU) and Canada, better known as CETA, has monopolized the headlines in recent weeks. Both parties finally signed the agreement on 30 October 2016. But what exactly are the benefits for companies and have all the obstacles to CETA been overcome?
The European Commission and the Government of Canada initiated the negotiations on the CETA back in 2009. As its name suggests, the Comprehensive Economic and Trade Agreement is not limited to conventional trade provisions. Mainly due to its broader content, many organisations of civil society have therefore followed closely the negotiations on CETA and a number of procedural complications have come to the fore at the time of signing the agreement.
The European Commission always negotiates trade agreements on the basis of a negotiating mandate, which has been approved by the Council (where all Member States are represented). In the case of Belgium, the approval of such a mandate must be coordinated between all the federated entities concerned. During the negotiations, the European Commission reports regularly to the Council, both politically and administratively. This allows the Council to check whether the Commission does comply with the approved mandate and ultimately compare the mandate to the end result of course.
Once the negotiations are completed, the text is translated into the official languages of the European Union prior to being submitted for signature to the Member States and then to the European Union and Canada. Considered as the final result of the negotiations, the text is virtually finalised and concluded.
The governments of the Member States are supposed to sign such an agreement. Whether the governments enjoying such a decision-making power are actually competent to sign the text will also be a determining factor.
In Belgium at this stage, however, further coordination has to take place between the federated entities concerned as they must give the Minister for Foreign Affairs full power (i.e. authorise him to sign the text in question). The governments of the federated entities usually grant this authorisation, but in the case of CETA, some of them have – on their own initiative – entrusted this power to their parliament.
Now that the CETA has been signed by all parties and the text is therefore final, its actual approval process or its ratification can begin. It will initially be submitted to the European Parliament for approval, starting with the International Trade Committee and then in plenary session. The vote in plenary is scheduled for early 2017.
Once voted by the European Parliament, CETA will be approved with regard to the competence of the European Union exclusively. The provisions covered by these powers (about 99% of the text) will then come into force. This is referred to as “provisional application”.
But CETA also includes some provisions relating to the powers of the Member States. This explains why Member States will also have to ratify the Treaty separately, according to their own national procedures.
In Belgium, this means that, in the case of CETA, each of the parliaments of our federated entities will have to vote on it, as CETA includes provisions that fall under the powers transferred to the federated entities. The vote will then be necessary under our constitution, whereas this was not the case for the signature. Other countries also have their own peculiar procedures. In the Netherlands, for instance, a petition was launched to call for a referendum on CETA.
Only when all Member States have ratified CETA will the agreement formally and fully enter into force. This can take four to five years, as was the case of the free trade agreement between the EU and South Korea.
CETA offers a broad range of benefits for different types of companies. Naturally, this applies to companies exporting to Canada. Less is known about its benefits for companies importing from Canada or for those whose customers are exporting to Canada. The main advantages of CETA are as follows:
- Removal of virtually all customs duties for the importation of Canadian (into the EU) and European (into Canada) goods. The majority of import duties will be immediately reduced to 0%. Others (for more sensitive products) will be phased out.
- The removal of import duties obviously applies only to goods that are European or Canadian in accordance with the rules of origin included in CETA. For the most part, these rules match the conventional European rules of origin.
- The customs clearance procedures for goods in Canada and the EU are dramatically simplified. This should speed up the clearance of goods and reduce transaction costs. Procedures will be automated wherever possible.
- Many goods will benefit from mutual recognition of conformity assessments. This means that testing of goods will no longer have to be duplicated for the European and Canadian markets. Certification agencies within the EU will be able to carry out the tests necessary to meet European and Canadian requirements. Canada and the EU will also strengthen collaboration on this level.
- European companies will be able to bid for Canadian public procurement contracts. This was already partly the case at national level, on the basis of agreements concluded in this area within the World Trade Organisation (WTO). Under CETA, Canada will also open up public procurement to EU companies at provincial and local levels. An electronic database providing an overview of all government procurement contracts in Canada will also be created.
- CETA will ensure that the intellectual property rights of European companies are better protected in Canada.
- Trade in services will also be greatly simplified with a high degree of trade liberalisation.
- Worker mobility between Canada and the EU will be greatly simplified by implementing a “temporary entry” approach (by means of visas and permits) and mutual recognition of qualifications (e.g. for engineers).
- A forum for regulatory cooperation between the EU and Canada will be established. Even though this forum will not have any decision-making powers, it will endeavour to match European and Canadian regulations and standards more effectively.
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Do you still have questions about CETA? Or would you like more details on a particular component of the agreement? Feel free to send an e-mail to Agoria’s international trade expert Jef D’Hollander. We also welcome your feedback or questions about Belgian and European trade policies.