Comprehensive Economic and Trade Agreement

"CETA" redirects here. For the US jobs and training program (1973-1982), see Comprehensive Employment and Training Act.

The Comprehensive Economic and Trade Agreement (CETA) is a free trade agreement between Canada and the European Union. It was signed by Canadian and EU leaders in Ottawa on September 26, 2014 after ten years of discussions and negotiations. The agreement must still be approved by the European Council and the European Parliament. If approved, the agreement will begin to come into effect in 2016, at which time about 98% of the tarriffs between the two parties will be eliminated.

CETA is expected to surpass the North American Free Trade Agreement between Canada, the United States, and Mexico as Canada's largest cross-border agreement.

History

CETA is Canada's biggest bilateral initiative since NAFTA. It was hatched as a result of a joint study "Assessing the Costs and Benefits of a Closer EU-Canada Economic Partnership" which was released in October 2008. Officials announced the launch of negotiations on 6 May 2009 at the Canada-EU Summit in Prague. This after the Canada-EU Summit in Ottawa on 18 March 2004 where leaders agreed to a framework for a new Canada-EU Trade and Investment Enhancement Agreement (TIEA). The TIEA was intended to move beyond traditional market access issues, to include areas such as trade and investment facilitation, competition, mutual recognition of professional qualifications, financial services, e-commerce, temporary entry, small- and medium-sized enterprises, sustainable development, and sharing science and technology. The TIEA was also to build on a Canada-EU regulatory co-operation framework for promoting bilateral co-operation on approaches to regulatory governance, advancing good regulatory practices and facilitating trade and investment. In addition to lowering barriers, the TIEA was meant to heighten Canadian and European interest in each other's markets. The TIEA continued until 2006 when Canada and the EU decided to pause negotiations. This led to negotiations on a Comprehensive Economic and Trade Agreement (CETA), and this agreement will go beyond the TIEA toward an agreement with a much broader and more ambitious scope.

An agreement in principle was signed by Prime Minister Stephen Harper and European Commission President José Manuel Barroso on October 18, 2013. The negotiations were concluded on August 1, 2014. The trade agreement was officially presented on September 25, 2014 by Canadian Prime Minister Stephen Harper and European Commission President Jose Manuel Barroso during an EU - Canada Summit at the Royal York Hotel in downtown Toronto. The Canada Europe Roundtable for Business (www.canada-europe.org) has served as the parallel business process from the launch to the conclusion of the CETA negotiations.

Meanwhile the German Television ARD / Berlin has published the Consolidated CETA Text (519 pages) including 5 annexes (1462 pages) on August 14, 2014 as PDF files on the Internet.

On 26 September 2014 the 1634 pages long Consolidated CETA text was published on the EU's official website.

Completion, translation of the final text into 24 EU languages, and ratification is expected to take two years since the passage of the deal requires not just the approval of the European Parliament but the individual 28 EU member states as well.

Research commissioned by negotiating parties

The EU-Canada Trade Sustainability Impact Assessment (SIA), a three-part study commissioned by the European Commission to independent experts and completed in September 2011, provides a comprehensive prediction on the impacts of CETA. It predicts a number of macro-economic and sector-specific impacts, suggesting the EU may see increases in real GDP of 0.02–0.03% in the long-term from CETA, whereas Canada may see increases of 0.18–0.36%; the Investment section of the report suggests these numbers could be higher when factoring in investment increases. At the sectoral level, the study predicts the greatest gains in output and trade to be stimulated by services liberalization and by the removal of tariffs applied on sensitive agricultural products; it also suggests CETA could have a positive social impact if it includes provisions on the ILO's Core Labour Standards and Decent Work Agenda. The study details a variety of impacts in various “cross-cutting” components of CETA: it advocates against controversial NAFTA-style ISDS provisions; predicts potentially imbalanced benefits from a government procurement (GP) chapter; assumes CETA will lead to an upward harmonization in IPR regulations, particularly changing Canadian IPR laws; and predicts impacts in terms of competition policy and several other areas.

Economic ties between the EU and Canada

Canada and the EU have a long history of economic co-operation. Comprising 28 Member States with a total population of over 500 million and a GDP of €13.0 trillion in 2012, the European Union (EU) is the world's largest single market, foreign investor and trader. As an integrated bloc, the EU represents Canada's second largest trading partner in goods and services. In 2008, Canadian goods and services exports to the EU totalled C$52.2 billion, an increase of 3.9% from 2007, and imports from the EU amounted to $62.4 billion.

According to Statistics Canada, the EU is also the second largest source of foreign direct investment (FDI) in Canada, with the stock of FDI amounting to $133.1 billion at the end of 2008. In 2008, the stock of Canada's direct investment in the EU totalled $136.6 billion, and the EU is the destination of 21.4% of Canadian direct investment abroad. According to Eurostat, the EU identified Canada as its third largest destination and its fourth largest source of FDI in 2007.

Copyright provisions

Many of its provisions on copyright were initially thought to be identical to the controversial ACTA, which was recently rejected by the European Parliament. The European Commission has indicated that this is not the case.

Part of the Agreement is stricter enforcement of intellectual property, including liability for Internet Service Providers, a ban on technologies that can be used to circumvent copyright, and other provisions similar to controversial ACTA, DMCA, PIPA, and SOPA, as below: Electronic Frontier Foundation stated that this "trade agreement replicates ACTA's notorious copyright provisions".

• Copyright term extension. The current term of copyright law in Canada is life of the author plus 50 years. This is consistent with the term requirements under the Berne Convention. The EU is demanding that Canada add an additional 20 years by making the term life plus 70 years.

• WIPO ratification. The EU is demanding that Canada respect the rights and obligations under the WIPO Internet treaties. The EU only formally ratified those treaties this week.

• Anti-circumvention provisions. The EU is demanding that Canada implement anti-circumvention provisions that include a ban on the distribution of circumvention devices. There is no such requirement in the WIPO Internet treaties.

• ISP Liability provisions. The EU is demanding statutory provisions on ISP liability where they act as mere conduits, cache content, or host content. ISPs would qualify for a statutory safe harbour in appropriate circumstances. There is no three-strikes and you're out language (which presumably originates with the U.S.).

• Enforcement provisions. The EU is demanding that Canada establish a host of new enforcement provisions including measures to preserve evidence, ordering alleged infringers to disclose information on a wide range of issue[s], mandate disclosure of banking information in commercial infringement cases, allow for injunctive relief, and destruction of goods. There is also a full section on new border measures requirements.

• Resale rights. The EU is demanding that Canada implement a new resale right that would provide artists with a royalty based on any resales of their works (subsequent to the first sale).

• Making available or distribution rights. The EU is demanding that Canada implement a distribution or making available right to copyright owners.

These are just the copyright provisions. There are sections dealing with patents, trademarks, designs, and (coming soon) geographical indications. These include:

• requiring Canada to comply with the Trademark Law Treaty (Canada is not a contracting party)

• requiring Canada to accede to the Hague System for the International Registration of Industrial Designs

• creating new legal protections for registered industrial designs including extending the term of protection from the current 10 years to up to 25 years

• requiring Canada to comply with the Patent Law Treaty (Canada has signed but not implemented)

• requiring Canada to establish enhanced protection for data submitted for pharmaceutical patents.

— Dr Michael Geist, Canada Research Chair in Internet and E-commerce Law, University of Ottawa

On 22 October 2012, five Polish NGOs criticized the secrecy surrounding the negotiations, the similarities to ACTA, and demanded more disclosures about the negotiations from the Polish government.

In the Consolidated CETA Text a long section on "Intellectual Property Rights", IPR, (p 339 - 375) deals comprehensively with copyrights , trademarks, patents, designs, trade secrets and licensing. Here reference is made to the TRIPS agreement (p 339 f ). In addition to the interests of the pharmaceutical and software industries CETA encourages to prosecute "Camcording" (the so-called "film piracy", Art. 5.6, p 343 ). Especially the negotiations on food exports lasted very long. The interests connected with European cheese exports and Canadian beef exports led to a protection of theese kinds of intellectual properties and long lists of „Geographical Indications Identifying a Product Originating in the European Union“ (p 363 - 347).

Non-tariff barriers

Environmental

On the subject of non-tariff barriers, Canadian stakeholders cite European regulations on beef, which include a ban on growth hormones, point to delays in the approval process for genetically modified organisms (GMOs), and GMO traceability and labelling requirements.

According to an opinion column by Maude Barlow, National Chairperson of The Council of Canadians in the Globe and Mail, implementation of the agreement would have serious negative consequences for the environment in both Canada and the European Union.

Economic

This new trade deal could negatively impact Canadians' constitutional right to use their own public bank (Bank of Canada). Canada's provinces and federal government has the right to borrow money at almost zero % from the bank of Canada, instead to borrow from other country or commercial bank at high compound interest.

Investment Protection and Investor-State-Tribunals

Section 4 of the CETA agreement (pages 158 - 161) provides Investment Protection to foreign investors,and guarantees a "fair and equitable treatment and full protection and security".

CETA allows foreign corporations to sue states if they claim to have suffered losses because

• a state had violated its Non Discriminatory Treatment obligations (CETA, Section 3, p 156 f)
• or because of a violation of the guaranteed investment protection.

This license exists only in one direction - States cannot sue companies in these investor-state arbitrations. Such investors complaints are nothing new under public international law ( UNCTAD listed end of 2012 exactly 514 such cases most from the United States, the Netherlands, Great Britain and Germany) but for the transatlantic trade, this comprehensive parallel justice is new.

After much criticism of the hitherto secret arbitration CETA now provides a certain transparency ("Article X.33: Transparency of Proceedings", p 174).

The "Final Award" ("Art. X.36, p 176) is to "be binding between the disputing parties and in respect of that particular case". (Art. X.39: Enforcement of Awards, p 177)

Against this arbitration German Economics Minister Sigmar Gabriel had written on 26 March 2014 EU Trade Commissioner Karel de Gucht , it " lies with the investment protection a sensitive core point, which can decide at the end about the German approval to a transatlantic free trade agreement ". Arbitration procedure in " civilized countries " were " unnecessary " - but not in principle reject. The CETA "Investor - State Dispute Settlement " ( ISDS ) would constitute a precedent for similar arrangements within TTIP. Furthermore with CETA it would be possible for U.S. companies to sue EU states through Canadian subsidiaries.

There are no appeal mechanisms against arbitration awards:

"1. An award issued by a Tribunal pursuant to this Section shall be binding between the disputing parties and in respect of that particular case." (Art. X.39: "Enforcement of Awards", p 177)

Investment without reasonable profit regarded as "indirect expropriation"

When CETA mentions compensations for expropriations it also refers to "indirect expropriation". Such "indirect expropriation" inter alia should be the case when measures of the contracting states

• affect economically strong to investors,
• last long and
• greatly disturb "the reasonable expectations associated with investments":

Annex X.11, "Expropriation", says explicitly on p 184: "1. (b) indirect expropriation occurs where a measure or series of measures of a Party has an effect equivalent to direct expropriation, in that it substantially deprives the investor of the fundamental attributes of property in its investment" …

2. The determination of whether a measure (…) constitutes an indirect expropriation requires (…) among other factors:

1. the economic impact of the measure or series of measures, although the sole fact that a measure or series of measures of a Party has an adverse effect on the economic value of an investment does not establish that an indirect expropriation has occurred;
2. the duration of the measure or series of measures by a Party;
3. the extent to which the measure or series of measures interferes with distinct, reasonable investment-backed expectations.

In principle, therefore , any investment that doesn't produce any "reasonable" profit can be regarded as an "indirect expropriation" leading to an arbitration proceeding.

However, there is one restriction: It shall be no "indirect expropriation" when measures

• do not discriminate against individual investors and
• serve the legitimate public welfare objectives:

Art. 3, Annex X.11, "Expropriation", p 184, states: "non-discriminatory measures used of a Party that are designed and applied to protect legitimate public welfare objectives, such as health , safety and the environment, do not constitute indirect expropriation."

This opens a threat against all consumer, environmental or worker protection laws to be criticised

• whether any measures taken really were "non-discriminatory" and
• whether really "legitimate" objectives were concerned.

Canada - Czech Republic visa dispute

Signing and ratification by the Czech Republic are required for CETA to come into effect. The Czech Republic had declared it would not do either until the visa requirements for Czech citizens by Canada were lifted. The issue was resolved on 14 November 2013 by Canada lifting the requirement.

Canada - Romania and Bulgaria visa dispute

Signing and ratification by Romania and Bulgaria are required for CETA to come into effect. Romania and Bulgaria had declared they would not do either until the visa requirements for Romanian and Bulgarian citizens by Canada were lifted. The issue is still unresolved.

See also

• Canada–European Free Trade Association Free Trade Agreement
• European Union free trade agreements
• Transatlantic Trade and Investment Partnership (TTIP)