Canada-EU trade deal lights the way to bigger pact with the US

23 Oct 2013 | Viewpoint
Getting deal done with Canada after four years of negotiations shows big trade pacts are possible without undermining Europe’s consumer or environmental protection rules and provides a template for an EU-US agreement on trade
By Joanne O'Dea

The Canada-EU deal on investment and trade agreed last week, is not only important in its own right as Europe’s first free trade agreement with a Group of Eight (G8) nation, but also in providing a template for a bigger pact with the US.

The Comprehensive Economic and Trade Agreement (CETA) will see over 99 per cent of tariffs between Europe and Canada eliminated, as well as a liberalisation of industrial tariffs, saving EU exporters an estimated €500 million in duties every year. The Commission’s promise is that the agreement will increase bilateral trade by 22.9 per cent a year, or €25.7 billion, when it comes into effect in 2015.

In addition, CETA will open up service sectors including telecommunications, energy, transport, and financial services and for the first time, all levels of government in Canada will let European companies bid for public contracts. CETA will also bring intellectual property protection in Canada in line with the EU and other major world economies. This will be of particular interest to the European pharmaceutical sector, whose branded drugs will now be protected for longer. 

These are important concessions, but agreement is also significant in the context of Europe’s wider free-trade efforts, which so far have only secured smaller deals with South Korea and Singapore. CETA previews some of the issues, such as the European stance on genetically-modified organisms and consumer and environmental protection, which must be finessed if there is to be an EU-US trade pact.

“This agreement with Canada not only gives an important boost to transatlantic commerce and economic integration, it gives a boost to the talks now underway with the US,” said Richard Bruton, Irish Minister for Jobs, Enterprise and Innovation, 

CETA will be the basis for gaining a strong foothold in the North American market providing “a catalyst for growth and the creation of jobs in Europe,” said European Commission President, José Manuel Barroso. Overall, the agreement could lead to GDP gains for the EU of up to €11.6 billion per year, the Commission claims.

The technical discussions based on the political agreement will now have to be completed. The measure must be approved by all 28 EU member states, the European Parliament and the federal and provincial governments in Canada. The deal is expected to be implemented in 2015.

While negotiations on the putative EU-US Transatlantic Trade and Investment Partnership scheduled for this month were postponed in light of the US government shutdown, the European Commission did get the nod from trade ministers across the EU to begin negotiating an investment agreement in China. The talks are due to begin at the EU-China summit next month.

Patent protection for pharmaceuticals

Intellectual property (IP) protection was a key concern for the EU throughout the negotiations with Canada, due to significant differences in legislation in the two blocs. The deal agreed last week will provide pharmaceutical companies with up to two extra years’ patent protection. A new right will also be established for patent-holders to appeal court decisions where a patent is declared invalid, a process that has only been available to challengers in Canada to date.

This has sparked fears in Canada that the price for some medicines will be pushed up due to a delay in access to cheaper generic drugs. The federal government has suggested that local authorities may be able to claim compensation for any higher drug costs. 

The European Federation of Pharmaceutical Industries and Associations (EFPIA) said the agreement will be beneficial to patients on both sides of the Atlantic, as well as for innovation and research.  EFPIA’s Canadian counterpart, Rx&D, welcomed CETA as “an essential step in strengthening Canada’s position on the international life sciences stage.” Russell Williams, President of Rx&D, said, “a more level playing field” in IP would be “a catalyst for innovation.”

Access to public procurement
 
CETA is the first time Canada has committed all its levels of government to the opening up of public procurement markets, a move that Barosso said, “will provide EU exporters with brand new opportunities.” An EU-Canada study in 2008 found that the overall value of contracts awarded by the federal government was €10.5 to €13.4 billion per annum, while in 2011 procurement by Canadian municipalities was estimated to be €82 billion. Canada will also create a single electronic procurement website that combines information on all tenders at all levels of government, making it easier for European suppliers to compete. 

The agreement includes a number of other measures designed to encourage and enable business across the two markets. CETA will establish a framework for mutual recognition of qualifications for professions such as architects, engineers and accountants, in a move designed to facilitate the provision of cross-border services. The framework will give the professional bodies in the EU and Canada an opportunity to work out the technical details of a mutual recognition and bring these under CETA.

The fact the deal with Canada has taken four years to conclude speaks to the difficulties that will be encountered as talks on a US-EU trade deal gather momentum. But CETA should also give EU negotiators confidence agreement with the US is possible and that trade barriers can be dismantled.

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