The Comprehensive Economic and Trade Agreement between Canada and the European Union (CETA) came into effect September 21, 2017.
Before CETA, only 25 per cent of EU tariff lines on Canadian goods were duty free. Now that CETA has entered into force, 98 per cent of EU tariffs are gone, and an additional one per cent will be eliminated over a seven-year phase out period.
According to a joint EU-Canada study from 2011, CETA could add $12 billion and 80,000 new jobs to the Canadian economy, along with boosting bilateral trade by 20 per cent.
CETA presents opportunities for Canadian producers, processors and manufacturers in a variety of sectors.
Tariffs on seafood have shrank to almost nothing, compared to their past rate of 20 per cent in some cases.
Agri-foods in general are in a prime position to benefit from CETA, as Europeans spend more of their household income on food than Americans, 17.4 per cent versus 8.6 per cent. Canadian agri-food also has a strong reputation internationally. CETA gives Canadian producers an edge in the European market over other large food producers like the U.S. and Brazil.
Europeans spend comparatively more of their household income on food than do Americans (17.4 per cent versus 8.6 per cent, respectively), so there should be many more opportunities for Canadian food exporters. Canada’s agri-food sector also has a very good international reputation, which can only add to the appeal of our food products.
There are opportunities in other sectors as well:
Because of CETA, Canadian companies will also have access to EU materials, technology, intermediate inputs and skilled labour. Our exporters can take advantage of these resources to make their supply chains more competitive.
The opportunities in the service sector are also abundant:
For companies offering services, they will not have to maintain a representative office in the EU or be an EU resident to provide services in the EU.
Canadians also have equal access to government procurement in EU member-states, a three-trillion euro market.
Sources: TCS and EDC
Here is the European perspective on the agreement:
Sources: TCS and EDC
CETA presents both opportunities and challenges for Canadian businesses:
This trade deal brings with it excitement, apprehension and a lot of questions. Based on the results of CanadianManufacturing.com’s Export Insights 2018 report, Canadian firms are divided on how CETA will impact their trade with Europe:
With 28 member states with a total population of 507 million, and a GDP over $20 trillion in 2014, the European Union is the world’s largest common market.
Taken as a single entity, the EU represents the world’s largest economy. Germany, France, Italy and the U.K. are individually among the ten largest economies in the world.
The EU accounts for 16 per cent of total world trade, and is a diverse market that imports primary products, raw materials, energy, capital equipment, chemicals and consumer goods.
Europe can also be a stepping stone to markets in Asia, Africa and the Middle East.
The Euro is the second-most traded currency in foreign-exchange markets worldwide and is shared by 18 countries. The Trade Commissioner Service (TCS) says the Euro provides stability for Canadian investors, reduces transaction costs and allows for more transparent pricing.
Trade between Canada and the EU is already significant. Canada now sends $40 billion in goods and $18 billion in services to the EU every year. Our outward foreign direct investment to the EU is $235 billion and our foreign affiliate sales there are $90 billion. Similarly, the EU sends $61 billion worth of goods and $24 billion worth of services to Canada yearly. Sales by EU affiliates in Canada are $295 billion. Taken collectively, this all adds up to $1 trillion in trade annually.
TCS operates on a country-by-country basis in Europe. These trade commissioners provide service to exporters in five sectors:
EU member states:
Other resources, contacts and information to help you forge business ties in your EU target market can be found at the European Union Chamber of Commerce in Canada.
Turkey, Iceland, Serbia, Montenegro and Macedonia are seeking to join, and Albania, Bosnia and Herzegovina, and Kosovo have expressed interest, but do not yet satisfy the political and economic conditions for EU membership.
Decision-making in the EU involves three main institutions:
The EU also has several regulatory agencies responsible for implementing legislation and providing advice to EU institutions.
EU law and policy are intricate and change regularly, so it’s up to exporters to stay abreast of these changes.
The EU can be defined as a customs union with a common tariff on imports from non-EU countries and a common commercial policy, as well as a single market with harmonized rules, and a financial union represented by the Euro currency.
However, despite the common application of tariffs, the integrated nature of this collective of markets, and the uniform set of rules, national and sub-national rules that differ from EU policy do exist. Uneven implementation of EU rules by member states causes fragmentation as well. There are also 28 sovereign governments operating within the EU framework, and 24 official languages. Combined with stark cultural and economic differences from region to region, you have a very complex and diverse market.
Understanding this diversity is key to success in the EU.
Information on navigating EU customs can be found here.
Consumer Rights and Data Protection
The EU and its member states adhere to all major IP agreements implemented by the World Intellectual Property Organization.
There are two IP organizations at the EU government level: the European Patent Office, and the Office of Harmonization in the Internal Market—which is responsible for registration of trademarks and designs.
Registering your IP in Canada provides no protection in Europe (except for copyright, which is automatic and universal), so make sure you get registered locally with the proper organization.
Patents, trademarks and designs for specific countries within the EU can be awarded at the national level.
CETA will give Canadian companies much greater access to government procurement opportunities with EU, national, regional and local bodies within the union.
At the EU level, the three main branches of government all award contracts, with the executive European Commission awarding the most.
To find tender opportunities, the Tenders Electronic Daily (TED) database is a good place to start, which lists up to 1,000 new contracts daily. TED not only provides notices from all 28 EU member states, but Switzerland, Norway, Lichtenstein and Iceland as well.
Visas and the Schengen Area
Canadian citizens travelling to Europe for short term business trips don’t need visas, and visa rules depend on whether the country is party to the Schengen Convention.
The Schengen Area is a zone without border controls between countries. Controls are maintained at the border of the area, and both EU and non-EU citizens can move freely within the Schengen Area.
Canadian travellers spending fewer than 90 days in a 180 day period in the Schengen Area don’t need visas, but passports must be valid for at least three months after the date of return. It is advised to obtain a passport stamp when entering and exiting the area to avoid difficulties with local authorities.
If you are staying longer than 90 days in a Schengen Area, contact the embassy in the country of entry to apply for a visa. Visas are subject to national conditions.
Only six countries are not party to the Schengen Convention: The U.K., Ireland, Cyprus, Romania, Bulgaria and Croatia.
Cyprus, Romania, Bulgaria and Croatia have applied to join, while the U.K. and Ireland have opted out.
Iceland, Liechtenstein, Norway and Switzerland have signed agreements in association with the Schengen Convention as well, even though they are non-EU members.
Monaco, San Marino and Vatican City are not part of the agreement, but still have open borders with the rest of the Schengen Area.
When entering the EU, border officials may ask for supporting documents like letters of invitation, proof of lodging and return tickets.
Investing in the EU
If your goal is not to move goods or services into the EU but to invest in European products, the European Commission has a service to connect you with foreign direct investment opportunities, the European Investment Project Portal:
The United Kingdom and Brexit
The U.K. is Canada’s third-largest export partner after the U.S. and China. In 2016 we sent $24.7 billion worth of goods and services, 3.9 per cent of our total exports, across the pond. We in turn imported $15.2 billion, 2.2 per cent of our total imports.
The U.K. is also the number one Canadian destination for foreign direct investment in Europe, with a total stock of about $97.9 billion as of 2016.
In June 2016, the U.K. voted by referendum to leave the European Union, sending shockwaves across the world.
On March 29, 2017 British PM Theresa May invoked Article 50 of the Lisbon Treaty, the official mechanism for withdrawing from the EU. That triggered a countdown to the UK’s eventual departure from the EU, which will be completed in exactly two years. Intense negotiations on the manner of that departure will take place between now and then.
The nature of the Brexit, whether it will be a “Hard Brexit” in which ties will be thoroughly severed between the UK and EU, or a “Soft Brexit” maintaining some pieces of the economic relationship enjoyed by the country and the economic community under its membership, is still a mystery. The reality of a post-Brexit UK won’t be fully understood until it’s all finished, and in the mean time foreign investors and exporters are left with much uncertainty.
Historical linkages have long tied Canada to the U.K., and for this reason among many others trade has always been and continues to be robust between the two nations. There is no reason to think that economic relationship will suddenly take dramatic backward slide, but Brexit (as the decision has come to be known) could change our trading relationship. In what way remains to be seen.
Both Theresa May and Justin Trudeau have expressed a desire to craft a bilateral trade deal between Canada and the U.K. once Brexit is complete. However, details of the perspective Anglo-Canadian trade agreement are unknown at this time, and any such arrangement will take some time to hammer out.