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CETA: the EU-Canada free trade agreement

Published Friday, February 3, 2017

This note provides details about CETA, the Comprehensive Trade and Economic Partnership. This is a free trade agreement between the EU and Canada.

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The Comprehensive Economic and Trade Agreement (CETA) is a free trade agreement between the EU and Canada. The CETA talks started in 2009 and were completed in 2014. The agreement was signed on 30 October 2016. Signing of the agreement was delayed by a few days due to objections from the Walloon Parliament. Signature of the agreement does not mean it comes into force immediately. The next step is consideration of the agreement by the European Parliament. Provided the European Parliament gives its consent, much (but not all) of CETA may come into force provisionally. CETA could come into force provisionally in Spring 2017.

CETA removes all tariffs on industrial products traded between the EU and Canada. Most will be removed when the agreement comes into force. All will be removed within seven years. There is substantial liberalisation of trade in agricultural products. EU businesses will be allowed to bid for public procurement contracts in Canada.

The European Commission has put CETA forward as a “mixed agreement” while maintaining its strict legal view that CETA is an “EU-only” agreement. As a mixed agreement, CETA must be ratified by each EU Member State and must receive the European Parliament’s consent. In the UK, the agreement must be laid before Parliament for a period of 21 sitting days. The agreement can only be ratified if the 21 day period has passed without either House having resolved that it should not be ratified. In the event of such a resolution by the Commons, a further period of 21 days is triggered during which the Commons can again raise objections. The European Scrutiny Committee has recommended that there be a debate on CETA on the Floor of the House of Commons. CETA will be debated in European Committee B on Monday 6 February 2017. The House of Commons International Trade Committee has also started an inquiry into CETA.

The agreement may be provisionally implemented after consent from the European Parliament but before ratification by Member States. The Commission favours this approach. Only those areas of the agreement falling within EU competence may be provisionally applied. Critics argue that this could cover most of CETA. The Commission has said that the controversial Investment Court System provisions will not be provisionally applied. They will not, therefore, come into force unless CETA is ratified by Member States.

Those in favour of CETA argue that it will boost trade between the EU and Canada. CETA has been described by the European Commission as “a milestone in European trade policy” and “the most ambitious trade agreement that the EU has ever concluded.” The European Commission argues that criticisms of the investment provisions are unfounded, claiming that CETA protects governments’ right to regulate and that the proposed Investment Court System is a fairer and more transparent replacement for the widely criticised Investor State Dispute Settlement (ISDS) provisions.

Critics argue that the agreement is unduly favourable to business and may lead to a lowering of regulatory standards. Opponents of CETA remain unconvinced by the reforms to the investment provisions, arguing that these give foreign investors special privileges and may deter governments from legislating in the public interest for fear of litigation. CETA is also seen by some as a way of bringing in elements of TTIP through the back door. There have also been criticisms of the process of ratifying trade deals – in particular that CETA may be subject to “provisional application” – ie before parliaments in EU Member States have had a chance to ratify it.

While the UK remains in the EU, it will be subject to CETA’s provisions once it comes into force. The precise date of Brexit is not yet known but given the time needed to ratify CETA in all EU Member States (assuming it is ratified), there is a possibility that the UK will have left the EU by the time CETA comes fully into force. While the situation is not entirely clear, the general view is that the UK would need to renegotiate its trade agreements with non-EU countries after Brexit. It has been suggested that if Brexit occurred after full ratification of CETA, the UK could be bound by its investment provisions for 20 years. The European Scrutiny Committee has asked the Government to provide more detail on how Brexit will affect CETA.

 

Commons Briefing papers CBP-7492

Author: Dominic Webb

Topics: International economic relations, International trade, North America

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