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September Date Set for Provisional Application of CETA

Posted July 10, 2017

Following a meeting this weekend on the sidelines of the G-20 summit in Hamburg, Canada and the European Union announced they had agreed to commence provisional application of the Comprehensive Economic and Trade Agreement on September 21, 2017, thereby allowing for all of the deal’s necessary implementing measures to be taken prior to that date.

With provisional application, almost all of the “non-controversial” aspects of CETA will go into effect, even though there are still a few outstanding issues yet to be resolved. 

Foremost among the unresolved issues are concerns a number of EU countries still have about the accord’s investment protection provisions, which have been a lightning rod for criticism from a range of civil society groups fearful of their perceived threat to the public sector and national sovereignty.  A recent decision by the European Court of Justice arguably complicated matters in this regard by determining that such investment provisions fall outside the “exclusive competence” of the EU and therefore must be approved by the national and regional parliaments of the EU member states in accordance with their domestic laws.

For the rest of the deal where the EU has exclusive competence, provisional implementation will mean that roughly 96% of the agreement’s trade measures will come into effect on September 21. As a result, virtually all tariffs on goods will be eliminated immediately – over 99% of the non-agricultural tariffs and over 92% of the agricultural tariffs will be zero on day one. Tariffs on the remaining items will be phased out over time; up to 7 years for the most sensitive goods.  Some agricultural goods (cheese, dairy, beef, veal, pork, etc.) will be subject to origin quotas and others will be subject to tariff rate quotas.

Other provisions of CETA covering mechanisms to address technical barriers to trade, the harmonization of sanitary and phytosanitary measures, the opening of EU and Canadian public procurement to non-discriminatory participation by businesses from the other party, and new rules designed to liberalize the trade in services across a wide range of activities, will all begin to take effect as of the provisional implementation date.

In what may have been intended as a rebuke to the Trump administration’s nationalistic “America First” trade policy, a joint statement by Prime Minister Justin Trudeau and European Commission President Jean-Claude Juncker announcing the agreement declared that it’s “by opening up to each other, by working closely with those who share the same values that we will shape and harness globalization.”

In a similar vein, Trudeau said it is “good news for the globe to look at examples of progressive trade deals that take into account a government’s responsibility to be able to protect its citizens, protect labour standards, protect the environment, while at the same time sharing and promoting the values that we share, Canada and Europe.”

Before leaving Germany, the prime minister told reporters that he was “looking forward to seeing the impact that CETA will have on future trade deals between other countries where they realize that we have raised the bar in demonstrating that trade can and must work for everyone,” adding that this objective was “something very much reflected in the G20 communiqué.”

Although negotiated over several years and concluded in large part by the Conservative government of Stephen Harper, since coming to power, the Trudeau Liberals have enthusiastically embraced CETA, even now touting the “gold standard deal” as a “progressive trade agreement for a strong middle class.” According to a government study frequently cited by officials, opening up the European market while eliminating 98% of all tariffs on goods could boost bilateral trade by 20% and increase Canada’s economic output by $12 billion per year.

Provisional application of CETA had initially been slated to coincide with Canada Day, but implementation hit unexpected snags over quotas for 17,700 additional tonnes of cheese imported from Europe and concerns raised by the European pharmaceutical industry about guarantees for their patents in view of certain promises made by Canada’s federal government to generic drug manufacturers.

A spokesman for International Trade Minister Francois-Philippe Champagne said the allocation of the cheese tariff rate quota would be made before the September deadline. “So what happens now is that both sides will complete their internal processes and closely consult one another on how the agreement will be implemented. This is about ensuring a smooth transition to a strong start for CETA,” the spokesman said.