After four years of talks, EU Commission President José Manuel Barroso and Canadian Prime Minister Stephen Harper recently reached political agreement on key elements of a Comprehensive Economic and Trade Agreement.
The deal is thefirst free trade agreement between the European Union and a G8 country.
In 2012, Canada was the EU's 12th most important trading partner, accounting for 1.8% of total external trade.
In the same year, the EU was Canada's second most important trading partner, after the US, with around 9.5% of Canada's total external trade. More information on EU-Canada trade flow can be found here.
As the US and Canada have already liberalised their trade under the North American Free Trade Agreement, the CETA will allow EU companies to compete with US exporters on the Canadian market by levelling the playing field.
Based on this political agreement, technical discussions will have to be completed to finalise the legal text of the agreement. The agreement must now be 'legally scrubbed' by EU lawyers, a stage that will take several months. The agreement will then be translated into 24 languages – and only then will a 'stabilised text' be shared publically.
The text then goes to the Council of Ministers for scrutiny (at this stage, the European Commission does not envisage any difficulties with member states).
After the council signature, the draft decision is sent to the European Parliament for consent. Once it receives the texts, the EP gives its consent after the necessary preparation at committee level. Formally, its powers are limited to saying 'yes' or 'no' to the agreement.
After consent of the parliament and ratification by member states, the council adopts the final Decision and the agreement is published in the Official Journal.
Canada will also need to put the agreement past its territories and provinces. The whole process will be completed in 2015 (Canadian elections are in October 2015 so that is the cut-off).
The deal: Key elements
The agreement will rapidly eliminate duties on agriculture. By the end of the transitional periods, Canada and the EU will liberalise, respectively, 92.8 % and 93.5 % of trade lines in agriculture.
In terms of products considered sensitive - dairy for Canada and beef, pork and sweetcorn for the EU - it has been agreed that new market access, amounting to a further 1 % and 1.9 % of tariff lines respectively, will be granted in the form of tariff rate quotas:
EU exports to Canada
Cheese 18,500t, of which 1,700t is for industrial cheese and 16,800t of high quality (currently the TRQ is 13,400t and the current trade flow is 18,000t). This is estimated to be worth around €150m especially for the high quality.
EU imports from Canada
35,000t for fresh beef (hormone free)
15,000t for frozen beef (hormone free)
75,000t for pork (ractopamine free)
8,000t for sweetcorn
On a positive note, it is understood that the EU will make gains on processed agricultural products such as biscuits, cakes, chocolate and pasta, with total liberalisation from Day One. For cereals, total liberalisation will be staged over seven years.
This will happen quickly, with most of them going as soon as the agreement enters into force. Overall, both sides will fully eliminate tariffs on more than 99% of all tariff lines.
Most duties will be eliminated at entry into force. Besides tariffs, the fish package also includes other elements of interest to EU firms, such as better access to Canadian fish for the EU processing industry. Sustainable fisheries will be developed in parallel, in particular with regard to monitoring, control and surveillance measures, and the fight against illegal, unreported and unregulated fishing.
Non-tariff barriers (NTBs)
The chapter on technical barriers to trade contains provisions that will improve transparency and foster closer contacts between the EU and Canada in the field of technical regulations.
Both sides also agree to further strengthen links between the relevant standard-setting bodies. A separate protocol will improve the recognition of conformity assessment between the parties. By reducing the cost of complying with technical regulations, standards and conformity assessment procedures (including marking and labelling provisions), the CETA will facilitate trade and benefit industry generally. According to estimates, this could amount to gains of up to €2.9 billion a year for the EU.
The automotive sector
Canada will recognise a list of EU car standards and will examine the recognition of further standards. This will make it much easier to export cars to Canada.
Sanitary and phytosanitary issues
The CETA consolidates the existing EU-Canada Veterinary Agreement and creates a more predictable environment for EU exporters of plants and plant products.
Some 145 iconic names, such as Grana Padano, Roquefort, Elia Kalamatas Olives or Queso Manchego, will enjoy the enhanced protection.
On the 5 most contentious cheeses (Feta, Gorgonzola, Fontina, Munster and Asiago that are seen as generic on the Canadian market), the EU position has been finally accepted by Canada - i.e. those five names are not generic and will be protected as GIs on the Canadian market.
The deal confirms existing 'Feta' products may continue to be sold as 'Feta', but there will have to be original labelling of these products, no evocation (use of Greek flags/alphabet etc) and any new product must be called 'Feta-like/Feta-style'.
For prosciutto di Parma and prosciutto di San Daniele, the deal allows these products to be marketed as such and thereby resolves several long-standing disputes. These names have been banned on the Canadian market for more than 20 years. It sees for the first time the co-existence of trademarks and GIs.
For eight other products, including Parmesan and Black Forest ham, the GI is recognised, but an English/French translation is 'free'/not protected.
After the CETA, producers of these terms will enjoy in Canada a better protection compared to current situation (no protection at all). While competing with companies using the same name, they will have legal rights to oppose misleading and deceptive uses. Canada will ensure administrative action against deceptive practices. The Agreement also provides for the possibility to add other products' names to the list in the future.
Trade deals should always be looked at in the round, yet invariably the analysis focuses on the successes and failures in relation to specific products.
Canada secured greater market access for beef and pork exports in the negotiations. By contrast, the Commission settled for a lower market share than anticipated for European cheese – undoubtedly a disappointment, and particularly at a time when farmers are improving their production capacity ahead of the abolition of dairy quotas in April 2015.
For the past number of months, the Canadian side has been pushing for an annual TRQ of nearly 60,000t for beef, with the Commission’s red line understood to have been 40,000t. The agreed concession of 50,000t splits the difference, but potentially sets a precedent ahead of transatlantic trade talks and could potentially weaken the EU’s negotiating hand - rumours in Brussels say that Washington is eyeing a x5/6 multiple of the Canadian baseline.
Much has been made of the gains won by the EU on Geographical Indications. This is a point emphasised by Copa Cogeca in their reaction to the trade detail, although the UK agri-food sector has made relatively little use of such designations compared to other member states (the UK has 50 products with registered geographic status; Italy has 256; France has 201).
Above all, it will be future trade flows that determine winners and losers. Although sanitary and phytosanitary issues will be partly addressed (as outlined above) by the deal, some issues will remain a barrier to trade. For instance, it is worth remembering that the quotas agreed are for hormone-free beef and ractopamine-free pork. This will keep potential impacts on the UK market in perspective, particularly when noting that in 2012 the UK imported just 25t of frozen beef from Canada and no pigmeat due to sanitary issues.