Canada and CETA, Latest news

War in Ukraine revives European interest in CETA

The director-general of the European Commission’s trade directorate Sabine Weyand said there is a “new dynamism” in Europe when it comes to ratifying CETA, the landmark trade and investment agreement between the European Union and Canada.

“The geopolitical situation has changed the debate on trade policy,” said the commission’s top trade civil servant during an event marking the fifth anniversary of the entry into force of the accord.

The bulk of CETA’s provisions have been provisionally applied since September 2017. But only 16 of the 27 EU member states have ratified it. France, Germany, and Italy continue to hold out.

Yet Weyand noted that the tide is turning and that the ratification discussion “is getting easier, we see progress”.

Weyand suggested that it is “beneficial” for those countries that have not yet approved the deal to be discussing ratification on the basis of the results following CETA’s provisional application.

One country where the tide is turning is Germany, where the coalition government is intent on ratifying CETA before the end of the year.

Berlin’s ratification is however conditional on Brussels and Ottawa agreeing additional clarifications related to investment protection provisions included in the treaty.

A text containing these clarifications was agreed between the commission and Germany over the summer and is currently being discussed by EU member states.

During yesterday’s intervention Weyand touched on the importance of broadening out trade beyond the purely economic.

“Trade is an instrument to organise the world around us in line with our interests and values,” she said.

Weyand said she hopes to see progress on the sealing of the EU’s deals with Chile and Mexico “very soon”.

The EU’s top trade civil servant said that the agreement with Mercosur, concluded in 2019 but whose approval process is stalled in Europe, is not a “quick fix”. The commission is currently developing an additional text to tackle deforestation in the Amazon to be attached to the agreement.

“If you have complementary economic structures, the same values, the same outlook, those are ideal conditions for a trade agreement. CETA is as good as it gets in this respect,” she said.

Does this mean the EU can only trade with liberal democracies?

“No,” she said. “We need trade rules to organise coexistence between different systems. We need rules to deal with the impact of the Chinese system on the rest of the world.”

The official gave examples of some critical products and raw materials where the EU is dependent on China. “That’s where we need to diversify. You never know when such dependencies could be weaponised.”

Trade growth

The event organised by the EU executive was clearly intended to promote the benefits of the agreement and help accelerate the ratification process in the member states.

Edouard Bourcieu, chief economist at DG Trade, explained that the average value of EU exports to Canada in the four years following entry into force had increased by 22% to €36 billion a year compared to the 4-year period before the entry into force.

Bourcieu explained that this is 12% higher than the increase in EU exports to the rest of the world over the same period.

EU exports to Canada of animal products have almost doubled since 2017, whilst vegetable products saw a 40% increase, metals 66%, plastics 43%, and textiles 30%.

During his presentation the commission’s economist noted that the EU exports more beef to Canada than it imports.

This contradicts fears expressed by European farmers that CETA would result in a surge of meat imports and damage their livelihoods.

Bourcieu also said that the number of SMEs exporting to Canada has increased by one third to 40,000, with the number of jobs reliant on EU exports to Canada rising by 12% to 700,000.

Marie-France Paquet, chief economist at Global Affairs Canada, said that CETA “benefits both sides” and that two-way trade between Canada and the EU “hit a record high in 2021”.

The official explained that Canadian exports receiving tariff reduction from CETA grew by 24.6% year-on-year whilst Canadian imports that benefited grew by 46.2%.

Grains and potash: Canada to the rescue

A major theme during the event was how Ottawa had effectively come to the rescue of the EU in the wake of the Russian invasion of Ukraine.

Bourcieu said the value of EU imports of potash, which is used to make fertiliser, had jumped from €15 million in 2021 to more than €50 million in 2022.

“If Canada wasn’t there, an extremely difficult situation would be even more difficult” said Michael Scannell, deputy director-general in the commission’s agriculture directorate.

The official mentioned how Canada is expected to have a “record good harvest this year” which will “more than exceed the deficit” from Ukraine, given the damage to the latter’s infrastructure as a result of the invasion.

The event tended to focus on the positives from the CETA agreement, but this did not prevent various shortcomings from being identified.

Outstanding issues

Scannell said the EU was still “unhappy” about cheese licenses, geographical indications, and wines and spirits, whilst Ottawa remains frustrated at EU rules on hormonal treatments on animal products.

Environmental groups are also pushing for changes to the trade and sustainability chapter of the agreement.

Whilst innovative at the time, the wording does not reflect the EU’s most recent aspirations in this area which were announced in June.

Asked how the TSD chapter could be brought up to date, Weyand said this would require re-opening the agreement and obliging each member state to ratify the text once again.

“This is something we are ready to look at,” she said, “but I don’t want to get into a situation where we disturb the ratification process.”

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