In the summer of 2016, the world watched in awe as Britain voted to exit the European Union. An isolationist fever gripped the European continent, throwing it into uncertainty and threatening the future of the most modern trade agreement in the world — the Canada-EU Comprehensive Economic and Trade Agreement (CETA).
Today, much of that fever seems to have abated. This past September, the agreement was provisionally implemented across Europe and already, several of the EU’s 28 members have ratified CETA locally. However, there is still a great deal of work to do before we reach a unanimous ”yes” on the agreement’s permanent implementation. If we can get there, we should expect no shortage of benefits from an agreement that is broad and ambitious.
Europe is Canada’s second-largest market, behind only the U.S. CETA will give Canadian businesses access to Europe’s massive market of more than 500 million people. A 2011 joint study by the European Commission and the government of Canada estimated the deal will inject more than $12 billion in new revenue into the Canadian economy. The study, titled Assessing the costs and benefits of a closer EU-Canada economic partnership, forecasted that CETA will boost bilateral trade by 20 per cent.
We aren’t the only country that stands to benefit. CETA will provide Europe with access to Canada’s services market, allow firms to bid for lucrative federal and provincial contracts and enable companies to purchase cheaper Canadian parts for manufacturing their own products.
CETA’s main advantage is the elimination or reduction of tariffs, but the agreement also addresses a range of other trade barriers, such as temporary travel restrictions and foreign investor risks. Improved regulatory co-operation, freer trade in services and new digital trade rules will benefit businesses on both sides of the Atlantic — from the Spanish fruit farmer in Cartagena to the app developer in Guelph.
Initially, it may be challenging for some companies to realize these rewards. One divisive element within CETA is the Investor State Dispute Settlement (ISDS). When travelling to Europe, one often hears a concern that this mechanism will open governments up to liability and bullying from foreign corporations. We should remember that Europe and Canada are advanced democratic societies with shared values. As with any contentious issue in policy, what reduces fear is time and familiarity.
Every trade agreement creates unease because it brings change. Governments should not pretend there will not be challenges for businesses in all of our countries. Instead, they should provide companies with the services and assistance they need to overcome any temporary disruptions.
During the initial NAFTA negotiations 25 years ago, there was significant anxiety among many businesses in Canada. One of the most discussed of all the sectors was the Canadian wine industry. The prevailing wisdom was that the Canadian wine market would be wiped out by the deal.
Instead of writing off the industry, the government provided it with a transition fund, which was rather modest at the time. Through that support and their own ingenuity, Canadian vintners relaunched themselves, planted better grapes, revolutionized their marketing and ended up with a higher value product for a higher profit. Trade agreements can accelerate economic growth, even if the disruption they cause seems frightening at first.
Perhaps the greatest obstacle to the ratification of CETA and of other trade agreements is the lingering anti-trade sentiment in pockets across the globe. In a little more than a year, we witnessed the dismaying cost of Brexit, the brief rise of France’s Front National and the frequent protectionist promises of U.S. President Donald Trump.
With a provisional agreement now in place, the European nations now face the process for permanent ratification. Canada’s role is not to look on passively, but to make an impassioned case for what is the most forward-looking trade agreement in the world. No other agreement incorporates the future complexities of international business, such as digital trade and the mobility of skilled professionals. Canada needs to get our European partners to “yes.”
Getting some governments to embrace trade with Canada will require effort on our part. There is no simple way to achieve this goal; our government and business leaders will have to make their way from legislative assembly to legislative assembly, outlining the agreement’s advantages.
This is compounded by uncertainty about where the agreement goes once the Britain leaves. For Canada, the loss of Britain from the agreement was a terrible disappointment. Some experts had estimated up to 40 per cent of CETA’s benefit would come from that country. Is our hard work to be done all over again in a new Canada-Britain trade agreement? The answer may not be clear yet, but we should seek as seamless as possible a treatment of the Britain under CETA.
Our relationship with Germany, the proverbial locomotive of the EU economy, will be of particular importance. Its economic strength confers upon it an unofficial status as leader, but like any leader, it is questioned and challenged. Will a re-elected Chancellor Angela Merkel risk upsetting a delicate balance for the sake of Canada? Now that she has safely been re-elected, the likely answer is that she will. Meetings between the German chancellor and Canada’s prime minister have not only been warm, but the two share a common stance on key issues beyond trade, such as NATO and the refugee crisis. This year, Chancellor Merkel acknowledged there would be benefits in CETA for both countries.
The situation seems wholly different in Belgium, where the regional government of Wallonia has already expressed reticence about ratifying the agreement. Despite the recent change of that particular regional government, the risk remains that without approval from all regional governments of Belgium, the federal government’s hands will be tied.
Last time this situation arose, it was as the European Parliament was preparing to ratify CETA and it led to a deadlock. Only through then-trade minister Chrystia Freeland’s impassioned plea and willingness to walk away, as well as a last-ditch, Hail-Mary rewording of some of the clauses, were we able to move Wallonia to a neutral position. Will the same kind of play work this time around? More important, given that the legislative assemblies of Latvia, Denmark, Croatia and Spain have already ratified the full agreement, is that clause-rewriting option still on the table, or are we placing the sub-national governments in a “take-it-or-leave-it” situation?
Even though our French-speaking cousins in Wallonia seem cooler to trade with Canada, French President Emmanuel Macron’s government is an important ally. While the rookie G7 president had to promise a full evaluation of CETA during his electoral campaign, since his election he has been a champion of trade, open borders and progressive values. These are all reflected in CETA, making it the perfect agreement for Macron to get behind for the advancement of the French economy.
We know that the prosperity of countries depends on trade. As advocates, we can make CETA a living rebuttal to these anti-trade arguments. There would be nothing more influential than to show our deal is working, our prosperity is rising and our relations are peaceful. The ratification of CETA has the power not only to signal a major economic achievement, but also to provide a united message to the world.
Here in Canada, we will continue to do our part, even if we have been understandably distracted by the disorder south of the border. It’s regrettable that a historic trade opportunity such as CETA has not been our only priority.
Despite being forced to divide our attention, we have two very important advantages. The first is the skill of our diplomats. The second is knowing that this agreement can be a very powerful spur to businesses, employees, economies, communities and the environment on both sides of the Atlantic.
Let’s reap those rewards by securing a resounding ”yes” from our European partners.
Perrin Beatty is the president and CEO of the Canadian Chamber of Commerce.
