News & Events

- 09/28/2017

CETA – a harbinger of new jobs

Published on Malta Today 28th September 2017
Get in touch: info@pkfmalta.com | +356 21 493 041

 

The Comprehensive Economic and Trade Agreement (CETA) is a free-trade agreement between Canada, the European Union and its Member States. The value of trade in goods between the EU and Canada reached a cool €64.3 billion last year. The deal was signed last week yet it took over seven years of negotiations. On the other hand, the US and the European Union have been negotiating the Transatlantic Trade and Investment Partnership (TTIP) for four years and there seems no hope of a quick solution.

CETA aims to reduce or remove a wide range of barriers to transatlantic trade and investment, but during the long period of negotiations these initiatives have proved controversial in Europe – particularly in Belgium.

Godelieve Quisthoudt-Rowohl, MEP, the EPP group’s spokeswoman in the Committee on International Trade, added that Europe and Canada are now leading the way to shaping and harnessing globalisation: “We share the same values – so we open up to each other, to the benefit of consumers and businesses”.

CETA will be fully implemented once the parliaments in all member states ratify the deal according to their respective domestic constitutional requirements. With CETA, EU companies will be able to bid for public contracts in Canada at all levels so for the first time this will open trade with both Canada’s federal government and municipalities to EU exporters to potentially buy goods and services. One expects this to exceed €30 billion annually.

So far, no other international agreement was ever concluded by Canada which offers similar opportunities to facilitate business flow by the creation of a single electronic procurement website combining information on all tenders to ensure transparency on procurement opportunities. One can sympathize with its promoters, who predict the deal could deliver economic gains of more than $100bn to both sides of the Atlantic.

It seems that the fly in the ointment concerns dispute settlement mechanisms consisting of a system through which individual companies can sue countries for alleged discriminatory practices. Thus we see how (ISDS) mechanisms are perhaps the most contentious aspects of CETA. These mechanisms aim to provide foreign investors with the right to sue the EU or its Member States in private tribunals over potential losses due to the imposition of unfavourable public welfare regulations.  While TTIP had been the main target of a lobby group resisting globalisation, the signature process for CETA received a warmer reception from most EU members.

In the current international climate, the agreement has underpinned Europe’s leading position on trade and gives a strong common answer to Donald Trump’s anti-trade policy which in turn placed TTIP on the back burner. Can we label the acceptance of CETA as the litmus test for Europe?

On home soil, we rejoice that not much negative publicity is evident in Malta on CETA while it is reassuring to read that the World Trade Institute (WTI) has published updated country-specific results of the impact of TTIP on the Maltese economy, concluding that it could lead to a marginal improvement in GDP. For instance objectors to TTIP argue that one cannot underemphasise objections over importation of a vast variety of genetically modified agricultural products from the USA.

So far these are resisted by European consumers. Not surprisingly German protestors say it gives too much power to multinationals – unbridled power to intimidate governments. Readers may concur that CETA cannot be all doom and gloom as there must be tangible advantages in lowering barriers to trade with Canada. It is important to note that CETA will not change EU standards.  Standards and regulations related to food safety, product safety, consumer protection, health, environment, social or labour standards etc. will remain untouched.

For starters, CETA is expected to increase trade between the partners by 20 percent and boost the EU economy by 12 billion euros annually. The trade pact will bring new opportunities for European companies by creating access to the Canadian market in key sectors such as financial services, telecommunications, energy and maritime transport. Other benefits are too numerous to mention, suffice to mention that principal ones include enhanced protection of European innovations, artists and traditional products, and guaranteeing an improved level playing field in intellectual property rights sector.

Canada will as a result upgrade its copyright protection in line with World Intellectual Property Organization rules. For instance one expects better intellectual property rights for protecting inventions, patents over new pharmaceutical products.  Equally protected will be European musicians, artists, and others working in the creative industries. The European Commission indicates the treaty will lead to savings in taxes and bring mutual recognition in regulated professions such as architects, accountants and engineers, and easier transfers of company staff and other professionals between the EU and Canada.

There will be additional safeguards for EU farmers and small businesses involved in food production. In addition, the chapter on technical barriers to trade contains provisions to improve transparency and foster closer contacts between the partners in the complex field of technical regulations. It goes without saying that this agreement between the EU and Canada further strengthens links between respective standard-setting bodies. Both sides have agreed to accept the conformity assessment certificates which each other’s regulatory bodies issue in a number of sectors, such as: electrical equipment, toys, machinery, and measuring equipment.

In conclusion, one appreciates that it was quite a tough cookie to secure unanimous agreement by all 28 member states over the signing of complex and ambitious trade pacts. One may remember the tortuous road for the Commission to receive unanimous agreement following treaty changes in the past when for example one cites the crucial amendments to the Lisbon Treaty and how it was a tortuous road until unanimous approval was secured. Now it is not surprising that the Commission burdened with Brexit talks which started this summer is planning ahead for another tough negotiation marathon.

Yet looming over the horizon some UK politicians see CETA as a potential model to base as an alternative trade deal to membership. This may be a false hope since services make up about 80% of the UK economy yet these are only partially covered by CETA. For instance, mentioning financial services it would be imperative for London-based banks to maintain full “passporting” rights for services within the EU – rights that they will certainly forfeit under a hard exit. The writing is on the wall that under the Trump administration it appears to be a difficult time for campaigners wanting to reach a transatlantic trade deal.

On a positive note, political leaders keen to impress voters and win their attention at the ballot box invariably all sing from the same hymn book, extolling the merits of increased international trade. To gain popularity they promise to conclude complex trade deals like TTIP, extolling them as the harbinger of millions of new jobs. Only time will tell if once elected they remain scrupulously faithful to their promises.

George Mangion

Author: George Mangion 
Published on Malta Today 28th September 2017
Get in touch: info@pkfmalta.com | +356 21 493 041