Challenges facing CETA negotiators. FeaturedWritten by Marcin Lewandowski
Despite recent stall of CETA (Comprehensive Economic Trade Agreement) negotiations, both the Canadian and European sides are confirming that the talks are on their way to be resolved soon. Rafal Lapkowski, Trade Advisor and Second Secretary of the EU delegation to Canada, stated that the negotiations should be resolved in the middle of this year. That means we should be seeing the final document on ministers’ desks in a few months.
Meanwhile, a group of Canadian business associations decided to take action. The Canada Europe Roundtable for Business (CERT), Canadian Chamber of Commerce (CCC), Canadian Council of Chief Executives (CCCE), Canadian Manufacturers & Exporters (CME), Canadian Association of Importers and Exporters (I.E.Canada) and the Canadian Federation of Independent Business (CFIB) have written an open letter addressed to the Honourable Ed Fast, Canadian Minister of International Trade, assuring him of their support for the minister’s actions.
The letter clearly states the benefits of CETA. It mentions that the EU is home to more than 500 millions consumers, and is the world’s largest importer of goods. By signing the agreement, Canadian businesses would gain a competitive advantage due to the „first-mover advantage” status, a situation in which a party benefits from being first to occupy a market segment. The benefits for the Europeans are based on the same principle, and hence the universal interest in the agreement.
But why are the negotiations taking so much time if there is so much support for the final resolution? There are a few issues the European Union and Canada are disagreeing on, and these issues drag the talks down. The issues listed below are based on a blog written by Michael Geist.
1. Public Procurement.
The public procurement disagreement has been on the news headlines for some time now, mostly due to the public opt-outs by major municipalities in Canada. The clause says that the EU companies will have full access to public contracts in Canada at all levels of government. That could result in huge impact to, for example, the transportation industry in Canada. Additionally, the EU is seeking the elimination of provincial regional development clauses, created to boost economic development through local contract awards. The Europeans are not willing to back down on this issue, therefore this clause might prove as the deciding factor in the negotiations.
2. Investment Access and Protection.
There are disagreements between the EU and Canada with regards to the investment access and protection. Although EU’s rules are compatible with whatever Canada is requesting, the same cannot be said about EU’s requests. The European Union wants access to markets such as telecommunications and maritime transport, itself being only partly flexible to give access to its own markets. Also, the EU is seeking an exemption from the Investment Canada Act review. On the other hand, Canada is seeking reduced investor protection in the financial services sector, as well as other clauses that would tackle the structure and applicability of an investor-to-state dispute settlement mechanism. These are all pretty sensitive issues on which the both sides have been so far disagreeing.
3. Intellectual Property and Provisions.
The European Union requests intellectual property clauses based on geographical indications of its food, wine, and spirit industries. Products such as feta cheese or prosciutto are protected in the EU; however, Canada has been producing their equivalents domestically. The EU has requested, therefore, that such products are phased out within 10 to 15 years. Additionally, such products will be forbidden for import into the EU.
Additionally, intense negotiations revolve around talks with regards to patents. In particular, the EU wants their pharmaceutical patents to extend over to behind the Canadian border. This would mean billions of dollars of extra costs for the already strained public health care system. However, sources say that Canada is willing to give in some of these pharmaceutical concessions in order to gain some leverage with regards to the agricultural issues mentioned above.
4. Rules of Origin.
The rule of origin is another issue on which Canada and EU differ. Most importantly, the definition of the rule of origin is different according to both negotiating parties. Canada respects the one-tier rule of origin; meaning that only one level of the product’s assembly needs to take place in a given country in order for that product to be considered as made in there. The EU is seeking a two-tier rule of origin. For EU the levels of a product's manufacturing process need to take place in a given country. For example, if Canada imports t-shirts from China, and prints on those t-shirt, these t-shirts are now considered Canadian – according to Canadian regulations. However, according to EU these t-shirt are still Chinese; it would require Canada to import the fabric, then make t-shirts here, and then print on them. Although t-shirts might not pose a huge problem for the negotiations, this principle has a significant impact on the automotive sector.
Two other clauses on which Canada and the EU disagree are cultural protection and labour rights. Although both countries differ in the particularities of both, these issues are considered as easily solvable, at least compared to the other four.
It is easy to see why the negotiations take so much time. However, according to Rafal Lapkowski, such negotiations always drag over, and they never commit to set deadlines. But the stars are aligning towards the final agreement. Let's hope it comes soon, and it benefits both economies the way it's planned to.
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