CETA passes another hurdle as EU parliament gives a nod

The Comprehensive Economic and Trade Agreement (CETA) has crossed another hurdle after the European Parliament passed the bill by 408-254 votes pushing the agreement towards its implementation phase.

Canada’s House of Commons did the same on Tuesday, and sent it to the upper house, the Senate, for its approval by next month.

The deal will also have to be ratified by all the 28 EU member countries and some of the regional governments within the EU countries.

The decision from EU parliament came as a boon for the Canadian economy as its biggest trade partner and next door neighbour the United States withdrew from the Trans-Pacific Partnership (TPP) and asked to rework the North American Free Trade Agreement (NAFTA).

Canadian Prime Minister Justin Trudeau signed the 1,600-page Canada-European Union Comprehensive Economic Trade Agreement with EU Council President Donald Tusk in Brussels on Oct 30.

Trudeau said after the signing ceremony that “the work is just beginning.” His remarks had highlighted the challenges ahead to bringing CETA fully into force as the deal suffered resistance from many fronts with the EU.

Bdnews24.com earlier reported on Canada’s tilt towards the EU, the single largest market across the Atlantic with 743 million people in 28 member states.

The EU is an important and vibrant market as it has more Fortune 500 companies than anywhere else in the world, including the US, and Canada will be one of the few countries to have guaranteed preferential access to the world’s two largest economies – the US and EU.

The Canadian government believes that CETA will create jobs, strengthen economic relations and boost Canada’s trade with the world’s second largest market.

It is a progressive free trade agreement that covers virtually all sectors and aspects of Canada-EU trade to eliminate or reduce barriers.

For example, before CETA, only 25 percent of EU tariff lines on Canadian goods were duty-free. When CETA comes into force, the EU will remove duties on 98 percent of its tariff lines, and after full implementation, on 99 percent of tariff lines.

Up until now Canada and the US have been the world’s largest trading partners with $670 billion worth of goods and services traded in 2015.

The US is also Canada’s most important direct investment destination, with $448 billion investment in stocks in the same year.

Canada has a trade deficit with the US as it imports more from its southern neighbour than any other country. And that includes the 28 nations in the EU. In 2015 alone, Canada imported $338 billion worth of goods and services from the US against a $325 billion export.

Since the Canada-US Free Trade Agreement came into force in 1989, two-way trade in goods and services between the two countries has more than tripled.

The North American Free Trade Agreement (NAFTA) facilitated it further. Under NAFTA, which came into force in 1994, the US, Canada and Mexico became a single, giant, integrated market of almost 400 million people with $6.5 trillion goods and services traded every year.

But US President Donald Trump as part of his election pledge ordered the withdrawal from TPP and renegotiation of NAFTA.

As a neighbour, Canada shares around 4,000 miles of the territorial boundary (excluding Alaska) with America and exports over 75 percent of its goods and services to that country. An upset in NAFTA or any change in it would put the Canadian economy in trouble.

CETA, therefore, has come at the right time for Canada.

With CETA, Canadian traders and businessmen will have guaranteed preferential access to a market of 743 million people in the EU. The traders will have their ‘leg up’ in competition because of the tariff elimination on goods and improved access for trade in services and government procurement.

The Canadian government has clearly gained in confidence by the signing of the CETA agreement, but there is yet a long way to go.

The signing ceremony in October 2016 was delayed by a month as a small regional government, Wallonia in Belgium, vetoed against the deal. It was of the view that CETA would put the region at a disadvantage in some different areas, including agriculture, conflict settlement in business deals and presence of US multinationals with offices in Canada.

Reuters news agency has reported that backers say CETA will increase Canadian-EU trade by 20 percent and boost the EU economy by 12 billion euros ($12.7 billion) a year and Canada's by C$12 billion ($9.18 billion) annually.

For Canada, the deal is important to reduce its reliance on the United States as an export market, according to the Reuters report.

It also said for the EU, it is a first trade pact with a G7 country and a success at a time when the bloc's credibility has taken a beating from Britain's 2016 vote to leave the grouping.

The EU also recognises EU-US trade talks are frozen, but wants CETA to be one of a series of ambitious trade deals it plans with countries, including Japan, Vietnam and Mexico.

($1 = 0.9481 euro; $1 = 1.3076 Canadian dollars)