The Comprehensive Economic and Trade Agreement (CETA) signed between Canada and the European Union (EU) on 18 October will eliminate 99% of trade tariffs, lift barriers to bilateral trade and increase investment and labour mobility. It is also expected to generate a US$12 billion increase for the Canadian economy and create 80,000 jobs in the country. The Canadian Prime Minister has cited this agreement as the ‘biggest deal Canada has ever made’. But, as always, there are two sides to every coin.
On the positive side, Canadian manufacturers will gain access to the second biggest market globally, estimated at 500 million consumers and approaching US$17 trillion in value, importing goods and services worth US$5.6 trillion. However, this comes at a price of lower entry barriers for EU manufacturers, and so not all Canadian businesses are cheering.
The obvious winners of the settlement are the shipping companies operating the EU-Canada routes, and the ports servicing their ships. European trade accounted for 38% of the Canadian East Coast’s port business last year, with this share set to expand significantly as the European Commission expects the deal to increase bilateral trade in goods and services by a fifth.
Source: UN Comtrade, Euromonitor International
Those to benefit will also include Canadian industries which are net exporters to Europe, for example some industries within the primary, intermediate and energy material sectors, such as grain or fish, oil and gas, basic precious and non-ferrous metals and wood and paper products.
The effect on the food, beverage and tobacco industries will be mixed. The fish, meat and oil product industries are net exporters, while dairy, pasta, alcoholic and soft drinks import from the EU far more than they ship back. As food was by far the most sensitive issue during the negotiations, it is worth mentioning that certain measures will be retained to protect the industries on both sides of the Atlantic. For example, the agreement will give Canadian farmers yearly duty-free access to the EU for up to 50,000 tonnes of beef, 80,000 tonnes of pork and 3,000 tonnes of bison, which is substantially higher than before. In the meantime, the EU will see the quotas on its cheese products doubled to around 30,000 tonnes.
On the other side of the coin, there are net importing industries which will lose tariff protection and face even tougher competition. These will mainly be industries supplying personal and high tech-goods and machinery.
In the context of trade with Europe, Canada is also a net importer of pharmaceuticals, with imported products accounting for almost 79% of sales in 2012. Despite an expected price decline for products of European origin, the established condition in the agreement for extending patents from 20 to 22 years for EU-based pharmaceuticals, resulting in the higher prices of drugs, is expected to increase healthcare costs across Canada by up to US$2 billion annually. The automotive industry is also very reliant on imports (87% of sales in 2012). So, although Canadian car manufacturers will be able to send up to 10 times as many cars to Europe, having more cars imported from the EU than exported there makes it equally plausible that the elimination of Canadian tariffs on European autos could be more of a disadvantage than a benefit.
To take effect, the Comprehensive Employment and Training Act must be ratified by 28 European Union Member States and be approved by Canada’s provincial and federal governments. This is expected to take place in 2015.