Comprehensive Economic and Trade Agreement (CETA)
Quick Facts on CETA
- It is a comprehensive EU-Canada economic agreement to boost trade, strengthen economic relations and create jobs
- It will do this by removing 99% of customs duties & many other obstacles for business
- The agreed text is available for the public and presented for EU democratic approval
The Comprehensive Economic and Trade Agreement (CETA) was adopted by the Council and signed at the EU-Canada Summit on 30 October 2016. Once applied, it will offer EU firms more and better business opportunities in Canada and support jobs in Europe.
It will remove customs duties, end restrictions on access to public contracts, open-up the services market, offer better conditions for investors and help prevent illegal copying of EU innovations and traditional products.
The agreement upholds Europe's standards in areas such as food safety and worker's rights. It contains all the guarantees to make sure that the economic gains do not come at the expense of democracy, the environment or consumers' health and safety.
The European Parliament will need to give its consent to the agreement before it can be provisionally applied. Provisional application allows European businesses and consumers to reap the benefits of the agreement early on.
Outcome of the CETA negotiations
Negotiators finished the negotiations on (CETA) in August 2014.
In July 2016 the European Commission adopted three draft Council decisions (signature, conclusion, and provisional application) and formally proposed them to the Council of the EU.
The Council adopted CETA and signed the agreement at the EU-Canada Summit of 30 October in Brussels. The adopted Council Decisions (available in all languages) consist of:
- The signature of the agreement
- The provisional application of the agreement
- A request for the European Parliament's consent to conclude the agreement
- The representatives of the Member States also adopted a joint interpretative instrument. This instrument, which is a joint text with Canada, will provide a binding interpretation of CETA's terms on specific issues.
After approval by the European Parliament, CETA will be provisionally applied.
Since the Investment Court System (ICS) is a new issue in trade agreements and the public debate on it is not finished in many countries, the choice of EU Member States is that ICS will be out of the scope of provisional application of CETA. This choice is supported by the Commission.
This means that ICS will only be implemented once all Member States conclude their national ratification procedures. During this time, the Commission will work with Canada to further elaborate some of the parameters of this new system, like the selection of judges, the access by smaller businesses to the new system and the appeal mechanism.
CETA's full entry into force will be subject to the EU's conclusion, through a Council decision with the consent of the European Parliament, and by all Member States through the relevant national ratification procedures.
What is CETA about?
Helping to create growth and jobs at home
CETA could help to boost growth and jobs across Europe.
- Other free trade deals that the EU has recently struck are doing exactly that. In the four years after the agreement with South Korea came into force, EU exports to that country rose fast – in goods by 55%, and in services by over 40%.
- Independent studies confirm that CETA could boost trade and investment even more.
What's more, every €1 billion in exports from the EU supports on average around 14,000 jobs. And such jobs tend to be higher paid than ones which don't rely on exports - up to 15% more for higher-skill ones.
Ending customs duties
From the first day of its implementation, Canada will eliminate duties worth €500 million for goods originating in the EU.
- CETA will eliminate duties quickly. It will scrap most of them as soon as the agreement enters into force. Seven years later, there will be no more customs duties between the EU and Canada on any industrial products.
- Importers from Europe will also benefit as the cost of parts, components, and other inputs they use to make their products falls.
- A far-reaching elimination of customs duties will also apply to the farming and food sector. Nearly 92% of EU agriculture and food products will be exported to Canada duty-free.
- Opening agricultural markets could keep prices in Europe down and provide consumers with more choice. As a major producer of high-quality food, the EU will benefit from improved access to Canada's market of high-income consumers. The outcome of the talks is especially promising for processed agricultural products (PAPs) - one of the EU’s main export interests. CETA will end nearly all Canadian duties on these products, which will benefit the EU food processing industry.
- For wines and spirits, CETA will not only end customs tariffs, but will also remove other relevant trade barriers. This will significantly improve access to the Canadian market.
- For a handful of sensitive products such as beef, pork, sweetcorn on the EU side and dairy from Canada, CETA will limit preferential access to quotas. CETA will not open up poultry or eggs on either side; it will maintain the EU entry-price system.
- Thanks to tariff eliminationthe EU processing industry will have better access to Canadian fish. The EU and Canada will develop sustainable fisheries in parallel, through monitoring, control and surveillance measures, and fighting illegal, unreported and unregulated fishing.
Letting EU businesses bid for Canadian public contracts
With CETA, EU companies will be able to bid for public contracts in Canada at all levels of government. For the first time this will include the provincial authorities, responsible for a large share of Canada's public spending.
- Every year, Canada's federal government, provinces and municipalities buy goods and services worth over €30 billion from private companies.
- European businesses will be the first foreign companies to get that level of access to Canadian public procurement markets. No other international agreement concluded by Canada offers similar opportunities.
- Canada will also create a single electronic procurement website that combines information on all tenders to ensure that the EU companies can take advantage of these new opportunities.
Stepping-up regulatory cooperation
Under CETA, the EU and Canada have agreed to set up a Regulatory Cooperation Forum. The Forum will operate as a voluntary scheme to exchange experiences and relevant information among regulators, and to help identify areas where regulators could cooperate.
- The Regulatory Cooperation Forum will provide assistance and make suggestions to regulators and legislators. But it will in no way restrict the decision-making power of regulators in the EU's Member States or at an EU level. The forum will not be able to change existing regulations or develop new legislation.
- In addition, the chapter on technical barriers to trade contains provisions to improve transparency and foster closer contacts between the EU and Canada in the field of technical regulations. The EU and Canada agree to further strengthen links between their relevant standard-setting bodies.
- Both sides have agreed to accept the conformity assessment certificates which each other's conformity assessment bodies issue in a number of sectors, such as:
- electrical equipment,
- measuring equipment
This means a conformity assessment body in the EU can test EU products for export to the Canadian market according to Canadian rules and vice versa. This will avoid both sides having to carry out the same test and could reduce costs for companies and consumers alike. This will particularly help smaller companies for whom paying twice for the same test can be prohibitive.
Protecting European innovations, artists and traditional products
CETA will create more of a level playing field in intellectual property rights between Canada and the EU. Canada will bring its copyright protection in line with World Intellectual Property Organization rules.
CETA will strengthen intellectual property rights for new pharmaceuticals. For example, patent holders will be able to appeal marketing authorisation decisions in Canada and Canada will bring its system of data protection more in line with that of the EU.
CETA will also help European musicians, artists, and others working in the creative industries to be properly rewarded for their work.
- The rules agreed in CETA will benefit EU farmers and small businesses involved in food production. CETA recognises the special status of, and offers protection on the Canadian market for, numerous European agricultural products from a specific geographical origin. The use of geographical indications (GIs) such as Grana Padano, Roquefort, Elia Kalamatas Olives or Aceto balsamico di Modena will be reserved in Canada for products imported from the European regions they traditionally come from.
- CETA will improve copyright protection by bringing Canadian rules closer to those of the EU when it comes to patents and digital rights management, as well as the liability of internet service providers.
The agreement also means the EU can add other products' names to the list in the future. In addition, thanks to the agreement, EU producers will finally be authorised to use the names of some famous EU GIs such as 'Prosciutto di Parma' and 'Prosciutto di San Daniele' when sold in Canada. This has not been the case for more than 20 years.
Opening up trade in services
Around half of the overall rise in the EU's economy from CETA is expected to come from opening up trade in services.
- CETA will bring new opportunities for European companies by creating access to the Canadian market in key sectors such as:
- financial services
- maritime transport
- The agreement will help the temporary movement of key company personnel and service-providers between the EU and Canada. This is particularly important for firms with overseas operations.
- Certain categories of professionals will also have easier access to temporarily supply services such as consultancy in a variety of sectors like accounting, architecture or engineering. In engineering in particular this access will make it easier for companies to carry out after-sales maintenance and monitoring.
- The agreement provides a framework for mutual recognition of qualifications in regulated professions in the future. At the moment, the lack of coherent requirements for professionals remains a challenge, especially for providing cross-border services.
Under CETA, the relevant professional organisations or authorities in the EU and Canada will be able to further work together on the technical details for recognising diplomas. This will help more workers from the EU to practise their professions in Canada, and vice-versa.
CETA is the first EU trade agreement that brings broad benefits to EU companies investing outside the EU.
- CETA removes barriers for investors wishing to enter the Canadian market. The agreement also ensures that all European investors in Canada are treated equally and fairly. To improve the investment climate and offer more certainty to investors, the EU and Canada have committed themselves to certain key principles, such as treating domestic and foreign investors in the same way (non-discrimination). Canada and the EU have also committed themselves not to impose any new restrictions on foreign shareholdings.
- Both the EU and Canada have strong legal systems and investors can turn to the domestic judicial system with any concerns they may have. But this may not always adequately protect foreign investors. For example, a government could seize the assets of a foreign investor without paying proper compensation. An investor could also face restrictions in bringing their case to a domestic court. EU Member States have traditionally laid down out rules governing international arbitration in their bilateral investment treaties. These rules allow investors to raise their concerns.
- CETA includes an investment protection and dispute settlement system which matches the expectations of the EU’s and Canada’s citizens and businesses. The new system is fairer and more transparent and has a solid institutional framework. At the same time, it will continue to resolve investment disputes quickly.
CETA incorporates all aspects of the EU’s new approach on investment protection and investment dispute settlement, including:
- Clear language confirming the right to regulate for all levels of government.
- A clear move away from the current arbitration system to a permanent and institution-based dispute settlement tribunal. The members of the tribunal will no longer be designated by the investor and the state involved in a specific dispute but in advance, by the authorities of the EU and Canada. Judges will have to be sufficiently qualified and demonstrate proven ethical conduct. The three members of the tribunal dealing with a given dispute will be allocated at random to guarantee their impartiality.
- Detailed commitments on ethics to avoid any conflicts of interest, whether perceived or real. Members of the tribunal and the appeal tribunal will, for instance, not be able to work as lawyers or experts in any other investment dispute.
- An appeals system similar to domestic legal systems, meaning that decisions will be checked for legal correctness and reversed where an error arises.
- A joint commitment by the EU and Canada to work with other trading partners to set up a permanent, multilateral investment court with a standing appeals system.
Further information on investment protection and investment dispute settlement
Ensuring good cooperation in future
CETA creates a framework for resolving any future disagreements between the EU and Canada about the Agreement.
- This framework applies to most areas of the agreement. The system is intended as a last resort if the parties fail to find a solution by other means. There is a fixed set of procedures and timeframes. If the two sides fail to reach agreement through formal consultations, they can ask for a panel of independent legal experts to be set up.
- As an alternative to a formal dispute settlement mechanism, the EU and Canada have also laid down rules for mediation to tackle any measure that hinders trade and investment between the EU and Canada. They can use this mediation on a voluntary basis.
Protecting democracy, consumers and the environment
The agreement ensures that the economic gains from CETA serve to uphold, rather than undermine, democracy, consumers' health and safety, social and labour rights and the environment.
- CETA will replace the 8 existing bilateral investment agreements between individual EU Member States and Canada. CETA has enabled the EU to introduce further guarantees to prevent abuse of investment protection rules and investor-state dispute settlement systems.
- The Commission has taken seriously the public's concerns about investment. The improved investor-to-state arbitration system will be based on clearer rules. These include:
- a code of conduct
- government control over arbitrators
- fully transparent proceedings
With CETA, investors will not be able to challenge genuine regulatory action by states. CETA will not affect the right of governments to regulate in the public interest.
- CETA will not affect food-related or environmental regulations in the EU. Canadian producers can only export and sell products in the EU if they fully respect the relevant European regulations - without any exception. For example, CETA does not affect EU restrictions on beef containing growth hormones or GMOs. Nor does CETA put specific restrictions on future rule-making. Both the EU and Canada will retain the right to regulate freely in areas of public interest such as environmental protection, or people's health and safety.
- In CETA, the EU and Canada have also reaffirmed their commitment to sustainable development. The agreement sets up ways for representatives of EU and Canadian civil society to implement and monitor the agreement. It also features a dedicated arbitration mechanism, including consultations with governments and a panel of experts. These experts can investigate labour disputes and later release public reports on the issue.
- CETA contains clear pledges to uphold the EU's high standards and not to undermine them for the sake of commercial gain. Both sides also commit themselves to working together with developing countries to help them raise their own standards.