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Canada, EU Finally Ink Trade Deal

by Ulrika Lomas, Tax-News.com, Brussels

22 October 2013


After more than four years of negotiations, the European Union (EU) and Canada have reached a political agreement on a Comprehensive Economic and Trade Agreement (CETA).

The deal will remove over 99 percent of tariffs between the two economies, and is designed to create new market access opportunities in services and investment. A joint declaration, issued by European Commission President José Manuel Barroso and Canadian President Stephen Harper, describes the CETA as "a 21st century, gold standard agreement that will create new opportunities on both sides of the Atlantic, generating more trade and investment, thus promoting growth and supporting more European and Canadian jobs."

A majority of duties will be eliminated as soon as the agreement enters into force, and industrial tariffs will be fully liberalized. By the end of the transitional period, Canada and the EU will liberalize, respectively, 92.8 percent and 93.5 percent of trade lines in agriculture. A chapter on technical barriers to trade contains provisions to improve transparency and foster closer contacts between the EU and Canada in the field of technical regulations.

The agreement will remove or alleviate barriers to investment, and create a more level playing field on intellectual property rights. All sub-federal levels of government in Canada have committed themselves to bilaterally opening their procurement markets, and the deal provides for an efficient dispute settlement mechanism that covers most areas.

Once implemented, the CETA is expected to boost bilateral trade in goods and services by 22.9 percent. Around half of the EU's anticipated overall gross domestic product (GDP) gains will come from changes to trade in services regulations, and could amount to up to EUR5.8bn (USD7.9bn) a year. Total EU exports to Canada are estimated to increase by 24.3 percent, while Canada bilateral exports to the EU should rise by 20.6 percent.

Annual real income gains of approximately EUR11.6bn for the EU and EUR8.2bn for Canada, respectively, are anticipated within seven years of the CETA's implementation.

Harper said that "with this agreement the number of countries with which Canada has free trade agreements will triple from 14 to 42, providing us with free trade access to over half of the entire global market place. It has been the stated desire of Canadian national governments since the 1970s to significantly broaden our trade relations beyond the United States and most particularly to secure such a relationship with Europe.

"This we have now achieved. And a potential for both our economies that measures in the billions of dollars. Of course most importantly both for Canadians and Europeans this agreement will help create good, well paying jobs. On our side of the Atlantic all regions and provinces stand to benefit. Whether you are a fisherman in Atlantic Canada, an industrial worker in Ontario or Quebec, a forester in Western Canada, increased trade with Europe will inevitably benefit you."

An estimated one in five Canadian jobs are tied to trade, with trade the equivalent of 60 percent of the country's GDP.

Barroso spoke of "a truly historic occasion. It is the first time that the European Union agrees a trade agreement with a G8 occasion and it will also be the biggest agreement of Canada ever. This is also a landmark achievement for the transatlantic economy and a stepping stone to an integrated transatlantic market, something I have been advocating for a long time and I am proud that this Commission is taking the necessary steps in that direction.

"This agreement will boost our trade and investment relations and will contribute to generate more growth and jobs in the European Union and Canada."

In 2012, Canada was the EU's 12th most important trade partner, accounting for 1.8 percent of the EU's total external trade. The EU is Canada's second largest trading partner, after the US, absorbing around 9.5 percent of Canada's total external trade. The value of bilateral goods last year reached EUR61.6bn.

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