Comprehensive Economic Trade Agreement –Small Story, Big Impact?

{The following is a guest piece written by Imogen Reed, a freelance writer. Later this summer I'll have more to say about CETA, once I have studied more of the details about about the agreement.}

The Comprehensive Economic Trade Agreement (CETA) is the proposed free trade agreement between Canada and the European Union (EU). Both are key trading partners, the EU is Canada’s second most important trade partner after the US with a 10.5% share of its total external trade. There is a belief that a closer economic relationship between both sides would result in benefits and growth by facilitating trade, worldwide money transfer and investment flows.

The History behind CETA

At the Canadian/EU Summit in 2007 the leaders agreed to a study being undertaken to examine the benefits and costs of a closer economic relationship. The completed study found that there could be a potential 20% boost in bilateral trade and GDP gains of up to $12 billion for Canada by 2014. As a result of this report leaders at the Canadian/EU Summit in 2008 agreed to take steps towards opening negotiations. A “Scoping Exercise” was carried out to establish areas of debate with a report being completed in March 2009. At the EU/Canadian summit in May, of that year, the negotiations on CETA were officially launched. These negotiations are now well advanced and both the EU and Canada are keen to maintain the momentum.

What does CETA Cover?

According to Robert Finbow, Dalhousie University political science professor CETA is a “next generation trade agreement that will deal with the new global economy involving virtual goods and complex supply chains”. CETA goes beyond quotas and tariff reductions as it also covers non- tariff barriers such as different standards and regulations dealing with the production of good and services in the EU and Canada. It is intended to reduce or eliminate indirect barriers to trade and investment. CETA therefore covers such things as public sector procurement, intellectual property issues, investment and regulatory principles, and freedom of labour.

The negotiations have been ground-breaking for both sides. As far as the Canadians are concerned it presents major challenges for Canadian federalism. Due to the far reaching agenda of CETA it covers areas of provincial jurisdiction such as education, environment, transportation science and technology. From the outset The EU asked Canada to ensure that the negotiations included the provinces so that they would respect its consequences and the final agreement could be enforceable.

From EU perspective the negotiators have to cope with a “negative list approach” for categorizing goods and services i.e. accepting all groupings unless particularly excluded as opposed to the normal EU “positive list approach” of excluding all matters unless positively named.

What would be the Impact of CETA?

At this stage there does appear to be a level of lack of transparency in the negotiations which makes it difficult for citizens on both sides of the Atlantic to participate.

Internally CETA would provide Canada the potential to provide a common market within its borders. If all the ten provinces agreed to CETA then they would have to harmonize and standardize rules and regulations not only with the EU but also with each other. Paradoxically the greatest benefit of CETA for Canada may be to liberalize trade within its borders especially in the field of government procurement.

In a report by Canada’s Researched Based Pharmaceutical Companies it agreed that “CETA is a unique opportunity for Canada to upgrade its intellectual property. This would make Canada a more attractive, secure and sustainable place for investment. The proposed changes would bring our country’s safeguards in line with those of our major trading partners, including the US, the EU and Japan, putting Canada back on the global investment map”.

Although the intellectual property reform suggested is favoured by the big pharmaceutical names it has not been seen as universally acceptable. The proposals are that the monopoly protection rights would be extended by the length of time it takes the regulator to approve the product and that the patent time is increased if a minor use for a drug is found. Any information supplied to the regulator would also remain the exclusive property of the company for 10-13 years. These changes would therefore hamper the generic production of drugs and so significantly increase costs for the consumer.

A growing number of municipalities, school boards and municipal associations, however, have raised concerns about CETA’s procurement policies. If it is ratified CETA will open the rules and standards of provinces and municipalities and so put them into direct competition with European corporations. Most municipalities want the municipal sector excluded from CETA altogether.

One of the most controversial aspect of CETA is that includes an “investment chapter” that gives Canadian and European corporations the right to sue governments when environmental, health or other policies interfere with their profits. Similar rules in NAFTA (the North America Free Trade Agreement) have contentiously allowed US corporations to dispute environmental and resource related policies of the Canadian government. Under Canadian law companies cannot own natural resources such as water and gas. However in the AbitibiBowater settlement brought under NAFTA, the company claimed that the Newfoundland government had broken the NATFA rules and commandeered its resources. The dispute was settled by awarding AbitibiBowater $130m dollars which essentially creates a precedent that resources can be privatised.