Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

Planning for CETA in a Climate of Uncertainty

Posted September 01, 2014

For several years now, the Harper Government has been touting the widespread benefits to businesses that will accrue from the “historic” trade agreement between Canada and the European Union scheduled to be signed at a summit in Ottawa later this month. The government claims that unprecedented new opportunities associated with the Comprehensive Economic Trade Agreement (CETA) will result in the creation of up to 80,000 net new Canadian jobs and a $12 billion annual boost in economic activity.
Planning Ahead
This optimistic assessment of the trade deal’s future impact has generally been shared by the business community – at least those sectors of it not directly threatened by the prospect of increased competition from an expected “flood” of European exports. The logic goes, as was stated some time ago by the Export Development Corporation (EDC), that because of the huge mismatch in the relative size of the two markets involved (500 million consumers versus 35 million), “CETA is obviously a much greater marketing opportunity for Canada than it is for Europe.”

Back in 2013, noting that “free access to half a billion consumers in almost 30 markets is an opportunity that no single country has ever experienced,” the EDC urged Canadian businesses to “start preparing the groundwork to penetrate the new CETA markets now, a couple of years before CETA becomes a reality.” It suggested that companies “need to check out which of those markets might be open to our products and services and start to establish the relationships that will help us to succeed past 2015.”

At the beginning of this year, Canadian Manufacturing magazine published an article by John Whitehead, director of trade policy for the Earnscliffe Strategy Group, who likewise encouraged small and medium-sized operators to start tackling the issues that would eventually best position them to leverage CETA to their advantage.  Whitehead suggested businesses not only consider “the impact of tumbling tariff walls between Canada and the EU,” but how “the non-tariff elements of the agreement could also be critical for many.” An entirely valid point, but something easier said than done given the complete text of the agreement detailing such “non-tariff elements” has yet to be made publically available for scrutiny and analysis.

Whitehead kicked off his piece by stating, “If all goes according to plan, the Canada-Europe trade deal will likely come into force sometime in 2015.” Since that article was written, however, things have most definitely not gone to plan. Negotiations dragged on much longer than anticipated following last year’s much-hyped agreement in principle and even though a “complete text” of the deal has now been “finalized” the legal review and translation process could take a further year to complete. European ratification of the deal can only take place after that, but even the nature of this process is currently in doubt.

As reported in Embassy magazine recently, there exists an ongoing legal argument within the EU over how such trade deals should be approved and whether a simple majority in the EU Parliament is required, or ratification by all 28 member states is also needed. Some EU lawmakers (in fact, every EU country, according to Werner Wnendt, Germany’s ambassador to Canada) contend that parts of the agreement, such as the controversial investor-state dispute provisions, should properly fall under the jurisdiction of the national governments of the EU’s member states to decide.

All these considerations reasonably put into question the Harper Government’s most recent claim that the agreement is on track to be in place within the next two years and possibly even raise concerns about whether the deal will materialize at all, should it not be ratified by the EU. With those contingencies in mind, how best should businesses plan ahead? Well, for Dan Kelly, you just stay focused on the long-game and continue laying the groundwork needed to compete more effectively in a global marketplace.

Kelly is head of the Canadian Federation of Independent Business (CFIB), a group representing 109,000 small and medium-sized businesses, and is part of the upcoming government-led trade mission to the U.K. looking to gain potential “first-mover competitive advantages” supposedly offered by the deal. As part of that initiative, he and other business representatives will be “getting a crash course in U.K. customs, consumer trends, food safety requirements and much more,” he says. “At the same time, we will be pitching the benefits and value of Canadian goods and services and building relationships towards a mutually prosperous future.”

The strategy being advocated by Kelley is arguably the most advantageous approach for businesses to take; moreover, it’s one without any appreciable downside. After all, any business seeking to expand the export market for their goods or services in Europe or even just working out how best to guard against overseas competition coming from that direction – whether or not driven by the impetus of free trade – should already be actively engaged in analyzing the various tariffs, regulatory trade barriers, competitive threats and potential opportunities involved. Granted, the lack of transparency surrounding CETA is making this exercise more of a challenge for businesses than it should be, but the worst possible approach is simply doing nothing at all or being temporarily lulled into a state of inertia by the uncertainty over when, or indeed if, a transatlantic trade deal will come into effect.