TORONTO—European Union President Jose Manuel Barroso and Prime Minister Stephen Harper signed an agreement in principle on October 18, 2013 that puts Canada well on its way to completing its biggest trade agreement since NAFTA. Yes indeed, this a very important agreement for Canadian businesses.
In addition to its breadth and overall ambition, the Comprehensive Economic and Trade Agreement (CETA) also gives Canadian businesses a first mover advantage over their US-based competitors – the EU and US have only just begun their discussions.
Having participated in the CETA process as Ontario’s chief negotiator, I can tell you that the duration of that first mover advantage is anything but certain.
Canada’s negotiations with the EU took 4 years to reach an agreement in principle; US discussions could be equally complex and time consuming or they could benefit from the agreement Canada has struck and be concluded much more quickly.
Either way, prudent planners will start now to take advantage of the first mover window for however long it remains open.
CETA gives Canadian businesses preferential access to the planet’s single largest market place. EU member countries generate almost $US 17 trillion of GDP. It is home to some 500 million consumers and some of the most advanced and successful global companies. Canada compares to the EU in roughly the same proportion as California compares with the US and Canadian economies combined.
In 2011, Eurostat reported that the sum of EU international trade in goods with the rest of the world was almost $3.3 trillion. For the EU, trade in goods exceeds trade in services by about three times. The dominance of goods trade should be of particular interest to Canadian manufacturers. The sheer size and importance of the EU’s market creates significant new opportunities for Canadian businesses to further expand and diversify their export markets.
The agreement in principle is important because it covers all of the major and most contentious parts of the deal, but there are still a few things negotiators need to work out. This could be a very quick process but even the remaining items need to respect each side’s negotiating boundaries and a variety of perspectives. In a negotiation that includes Canada’s national government, all of the provinces and territories, the EU and all of its member states, there are a lot of perspectives to consider to ensure all sides see a balanced final package.
Once negotiators have completed their work, a legal review needs to be undertaken to ensure the text accurately reflects the provisions negotiators have worked out. It then needs to be translated into the over 20 official languages of the EU before being ratified.
The importance that has been attached to completing the deal by both Prime Minister Harper and President Barroso is definitely helping the process move along briskly. Canadian Trade Minister Ed Fast has talked about 18-24 months from October 2013 before implementation, which should mean that the deal could come into force as soon as the second quarter of 2015.
In some contexts, an 18 to 24 month period is quite long. But in this case, the changes will be profound and will take time to include in strategic planning for manufacturers who are eyeing the EU market or for those who expect to see new competitors in the Canadian market. Most existing tariff barriers between Canada and the EU will drop and many other trade-friendly provisions will take effect when the deal comes into force.
For those manufacturing value chain businesses that don’t already have relationships in the European Union, understanding the new market potential and developing opportunities will inevitably take some time, as will implementing changes locally to defend market share against new competitors. From that perspective, mid-2015 is really just around the corner.
John Whitehead leads the trade policy group for the Earnscliffe Strategy Group after working more than 30 years in Ontario’s public service, a role that included representing Ontario’s trade policy interests. Email him at [email protected]