Canada and the EU Complete Trade Treaty Negotiations

by Bennett Jones LLP
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Canada and the European Union today announced that they have completed negotiation of their Comprehensive Economic and Trade Agreement (CETA). The announcement puts to rest extended speculation about whether a deal was still possible, speculation fuelled by the nearly ten months that has elapsed since the parties announced an “agreement-in-principle” last October.

The October political announcement suggested that only minor technical work remained. In fact, some significant elements of the CETA remained outstanding, including the all-important reservations that determine the extent of each side’s commitments on market access and national treatment for investment and services (especially at the sub-national and EU Member State levels) and the financial services text. Achieving buy-in from EU countries on certain market access issues, quota allocations for beef and pork among them, also proved more difficult than Canada had been led to believe by its Commission counterparts. Some of this may have reflected honest misjudgment, including of EU Member State sensitivities to the CETA creating possible “precedents” while the EU began negotiations on a trade deal (TTIP) with the United States. However, with today’s announcement, it can fairly be said that what remains really is technical work: the legal review, or “scrub”, to ensure the agreement is internally coherent and says what the negotiators intended it to say, and translation of the text into French and 21 other official EU languages.

As much of the text was completed months ago, work has undoubtedly already begun on the scrub and translation. Still, these are finicky and time-consuming processes which we expect will take several months. Once they are completed, the text will be ready for signing. On the EU side, this will require a decision of the EU Council; the process is simpler on the Canadian side where policy approval for signing is obtained by a decision of Cabinet, along with an Order-in-Council granting signing authority. All things considered, it could well be a year from now before the agreement is signed.

As a formal matter, the CETA will not come into force until it has been ratified. Again that is a relatively straightforward process on the Canadian side – particularly with a majority government to pass the necessary implementing legislation – but not so clear for the EU, where the respective roles of the Commission and Member States in the post-Lisbon Treaty era remains the subject of some debate. We know that it will require a vote of the EU Parliament but whether Member State parliaments too will have to approve the agreement is still a question. Ratification therefore could be two years away, maybe more.

The good news is that the CETA itself contemplates that it can be “provisionally applied”. This means that once it is signed and any necessary implementing legislation enacted, Canada and the EU can agree to give effect to many parts of the treaty before it is ratified. This will include the tariff elimination provisions.

As for when the CETA text will be made public, we expect – and hope – it will be soon. Ordinarily, Canada does not release the texts of trade treaties until they are signed. That has its logic but is more difficult to justify in the case of an agreement of such economic and political importance as the CETA. The NAFTA text was released in draft not long after those negotiations concluded; something similar would make sense for the CETA text, perhaps by September’s Canada-EU Summit between PM Harper and EU President Barroso.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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