CETA: Relationships in Europe key to success for Canadian firms

MISSISSAUGA, Ont.—Free trade deals with jurisdictions like South Korea and the European Union (EU) open Canada up to the new way of the world, according to an export strategist and trade policy insider, a way that depends heavily on building local bridges in order to take advantage of opportunity.

Speaking at the Manufacturing Canada Conference in Mississauga, Ont., John Whitehead, head of trade policy with the Earnscliffe Strategy Group, said the deals, and in particular the Comprehensive Economic and Trade Agreement (CETA) with the EU, present a tremendous opportunity for Canadian firms looking to break out abroad in some of the world’s largest markets.

World gross domestic product (GDP), according to Whitehead, is about $70 trillion, while Canada’s slice of the pie is worth a fraction of that—about $1.8 trillion, or 2.5 per cent.

Europe’s share of global GDP, however, is an astonishing $17 trillion, or 24 per cent, making it the single-largest economy in the world.

“The significance of this … is that we’re hooking up with one quarter of the world’s economy, 500 million consumers who are educated (and) sophisticated, and some of the largest businesses in the world,” Whitehead said.

Together with existing deals like the North American Free Trade Agreement (NAFTA) and upcoming ones like Canada’s agreement with South Korea—the country’s first free trade deal in the Asia-Pacific region—the CETA with Europe puts Canada in a great position to do business with most of the rest of the world.

“Canada is creating with this European deal an opportunity to be hooked up … with at least half of the world’s GDP,” Whitehead said.

Details about the deal are still scant, but Whitehead offered a glimpse into what went into CETA and what it means to Canadian firms looking to break into European markets.

“There is a lot of ambition in this, and in this case ambition equals complexity,” Whitehead said. “Tariffs are the usual place for trade agreements to start, and in this case the ambition has been high.”

After four years of negotiations between Canadian and European officials, the agreement will see the two sides axe the majority of tariffs and non-tariff barriers to trade, opening Canada up to a government-estimated $12-billion economic booster shot.

The deal will also ease the flow of services and labour across the Atlantic.

Whitehead said the CETA with Europe draws a lot of parallels to NAFTA in size and scope, though not all deals are cut from the same cloth.

And one of the key differences is the involvement of provincial representatives at the negotiating table—a rare move, according to Whitehead, but one that was important to EU officials.

“The European Union asked that the provinces be involved because they wanted a comprehensive agreement with Canada, they understood the role of provinces and they wanted as many elements of the Canadian economy (involved) as possible,” he said.

The key element, though, is opening procurement at all three levels of government in Canada to bidding by European firms.

Public procurement deals in Canada could be worth as much as $130 billion annually, making the concession one of the biggest wins for companies based across the pond.

Whitehead noted, though, that with 28 jurisdictions in the EU, procurement there could be worth $2.7 trillion, providing plenty of opportunity for Canadian firms who may lose out to competitors from Europe for public dollars at home.

Add it all up and what you get is Whitehead’s assessment that, combined with opportunity, CETA also brings risk for Canadian businesses, and it’s important for firms to familiarize themselves with what’s around the corner.

A good first step, he continued, is to join or build a network on European soil to “learn the ropes” and hit the ground running when the trade pact kicks in as early as mid-2015.

“A year is a lifetime in some businesses, but for a lot of businesses … a year is well within your strategic planning timeline,” Whitehead said.

And companies who start planning for CETA now will be in prime position to reap its rewards.