Series 14 - Back to Brexit Basics – EU/Canada Free Trade Agreement

Jul 05, 2018

Last time, in Series 13 of Back to Brexit Basics, we looked at the experience at customs borders between the EU and non-EU countries and what can be learned in terms of Brexit. In this series we look at the free trade agreement that was recently agreed between the EU and Canada to get an understanding of what is included in a free trade agreement. 

The free trade agreement between EU and Canada

We touched on free trade agreements in Series 2 of Back to Brexit Basics, and learned that the objective of these agreements is to increase trade of goods and services.  Free trade agreements can mean that customs duties on imports between the parties to the agreement are either zero or minimal.   However free-trade areas always and necessarily involve border checks.

Countries under a free trade agreement do need to operate a degree of customs controls at internal borders in order to ensure that goods do originate from the free trade agreement member and are therefore entitled to customs free trade. Parties to a free trade agreement are also free to make their own trade deals with other countries.  In this series we look at some of the features and benefits of the free trade agreement that was recently reached between the EU and Canada.

After some years of negotiation, the EU and Canada reached provisional agreement on free trade under an agreement called Comprehensive Economic and Trade Agreement (CETA) in September 2017.   It’s estimated that in time this agreement will save EU businesses €590 million a year which is the amount they pay in tariffs on goods exported to Canada. 

From an EU perspective, CETA will also:

  • remove customs duties on most products traded between the EU and Canada
  • open up markets for European food and drink exports
  • open up the Canadian services market to EU companies
  • make it easier for EU firms to bid for Canadian public contracts, therefore helping make European firms more competitive in Canada
  • cut EU exporters' costs while upholding standards
  • benefit small and medium-sized EU firms and EU consumers
  • allow for the mutual recognition of some qualifications, making it easier for European professionals to work in Canada
  • create predictable conditions for both EU and Canadian investors, making it easier for European firms to invest in Canada

Removing customs duties

By removing customs duties, European exports will be cheaper to buy in Canada and will therefore become more competitive on the Canadian market. In turn, Canadian imports into the EU will be cheaper and therefore more competitive.  European firms could therefore benefit from being able to purchase cheaper components from Canada which they may use to make their products.

For the agri-food sector, it’s estimated that European traders will be able to export almost 92 percent of their agri-food products to Canada duty-free.  This will create export opportunities for EU farmers and producers, particularly in fruit and vegetables, cheese and some processed foods.

What about services?

In terms of services, in its guidance, the European Commission has said that European firms will have “more opportunities to provide services, such as specialised maritime services like dredging, moving empty containers, or shipping certain cargo within Canada. In sectors such as environmental services, telecoms and finance, European firms will be able to access Canada's market at both federal and – for the first time – provincial levels”.

Recognition of standards

In terms of standards, the EU and Canada have agreed to accept each other’s “conformity assessment certificates” in areas such as machinery, toys, measuring equipment, electrical goods, and electronic and radio equipment.  This means that a standards body in the EU can test EU products that will be exported to Canada in accordance with Canadian rules and vice versa. Therefore products that are being exported from the EU to Canada will only need to be tested once in the EU and the standard certificate will be valid in Canada.  This could significantly cut costs for exporters.

In terms of next steps, CETA entered into force provisionally on 21 September 2017. Before it takes full effect it needs to be ratified by all of the Member States. 

You can read the legal text of CETA as well as some explanatory notes on the European Commission’s website.

Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.