The easy part — if ever there were one — is over. Now the hard part starts.
This fall marks the midpoint in the two-year timeframe for the completion of a Comprehensive Economic and Trade Agreement (CETA). Canada and Europe have had four rounds of formal negotiations and many informal discussions. Even a volcanic eruption in Iceland that grounded all but of few of the European negotiators last May didn’t slow the pace of meetings. Both sides plugged in their video conferencing gear and got down to business.
The Centre for Trade Policy and Law (CTPL) has been monitoring these negotiations from the beginning. We have run a simulation after each formal round, with graduate students representing each side and some of Canada’s most experienced former trade negotiators as the observers. We’ve created scenarios that are as close to real-life as possible to provide insights into the process and potential outcomes.
The latest simulation illustrated how complex these talks have already become From the beginning, it was agreed the negotiations would be “ambitious” in both scope and coverage. What this means is that the agenda — agriculture, government procurement, services and investment, intellectual property, environment and others — is filled with issues that are difficult to negotiate and hit directly at domestic political sensitivities.
For example, the Europeans want their firms to be able to bid on contracts from the provincial governments, especially provincially-owned hydro and telecommunication utilities. These areas were excluded from the government procurement deal which Canada concluded earlier this year with the U.S. But the EU will insist on their inclusion.
Another example is what is referred to as geographical indications or GIs. According to John Curtis, a former chief economist with DFAIT, “this is a very tough area for Canada.”
For the Europeans, “parma” is both a type of ham and the place from which it originates. The EU is intensely interested in trademarking this and many other names, thereby stopping foreign competitors from riding on the coattails of what the Europeans perceive as their brands. Any movement that Canada makes in this area could affect domestic producers of cheese and meats. Indeed the parma ham issue has been before the WTO for several years.
The challenge, said Mr. Curtis, “is to work with the producers to determine if there are any names that would have a minimal negative impact on business.”From that, government can then work with the producers to adapt if they are affected by the agreement.
This approach worked with the wine industry when business and government got together to figure out a strategy to compete under the Canada-U.S. Free Trade Agreement. Could the same approach work for the artisan cheese producers who are gaining acclaim in the Eastern Townships, Prince Edward County and elsewhere? That may be a long-term solution. But it would require reforms that won’t be realized within the current timeframe for a deal.
Another level of complexity is the number of players involved and how they are organized. Prior to the launching of formal negotiations, the EU developed a detailed mandate that was endorsed by all 27 member states.
The Canadian government went through a similar consultative process. But the number of players involved has added to the complexity.
The CETA negotiations are the first to see representatives of 14 levels of government (one federal, 10 provincial, and three territorial) directly involved in the negotiations. Previously, the provinces and territories were consulted but did not sit at the table. This ensures that they all have a stake in an agreement. But it has also meant there is some “learning-by-doing” involved in developing positions on key issues.
Canada’s position as the demandeur in these negotiations further complicates its team’s work. Canada has tried for years to engage Europe in a closer economic relationship as part of a strategy to diversify its trading relationships. The EU finally agreed, laying out specific objectives to be achieved within a limited time frame.
This is a difficult position for Canada. As Terry Collins-Williams, the chair of the negotiation simulation and former Canadian deputy chief negotiator to the WTO, said: “What was apparent early on in the simulation was how hard it is for Canada to try to find a balance between what the EU wants us to put on the table and what we can put on the table that makes practical commercial sense.”
Former NAFTA negotiator Bill Dymond cautioned that such a situation can compromise Canadian interests. “The government should be alive to the risks of negotiating in the absence of a business-driven agenda,” he said. “If there is no agenda, the agreement will have little effect on Canada-EU trade and investment.”
“Without broad and persistent support from the Canadian business community, there will be little countervailing pressure when inevitably some Canadian sector objects to the concessions offered to the EU.”
According to Pierre Gosselin, a former chair of the Canadian International Trade Tribunal and trade negotiator, this situation also plays to the EU’s advantage.
“The negotiations are all ‘plus’ for the Europeans. What they give us, they have already given to others,” he said. “So any gains are a net benefit for them. And if the negotiations fail, they move on.”
And where would they go?
“Clearly, the Europeans are considering the demonstration effect of these negotiations on the U.S.,” said Mr. Collins-Williams. “Their negotiators have as much as admitted that.”
There has been progress. Draft text has been prepared for several chapters. Both sides have exchanged offers that would have 90 percent of tariffs (both by number of tariff lines and by value of trade) eliminated the first day the agreement comes into effect. The teams are now engaged in how to eliminate the remaining 10 percent.
Canada is being particularly aggressive in finding an agreement on mutual recognition of professional and technical qualifications to allow greater movement of people across borders for business purposes. The issue is linked to the government’s broader interest in attracting more highly-skilled foreign workers to meet growing labour shortages. By linking the CETA negotiations to broader immigration objectives, greater internal support for an agreement is possible.
For Gilles LeBlanc, a former lead negotiator for Canada on trade rules during the Doha Round, this illustrates a critical point: “Are both parties prepared to make reforms in key areas where they have political sensitivities, with potential implications that could well go beyond the Canada-EU context?” For Mr. LeBlanc, this is a bellweather for how much can actually be realized.
John Curtis described the longer term challenge: “The CETA negotiations are forcing us to think about what kind of Canada we envisage for the 21st Century.”
Given these complexities and challenges, it is too early to tell what an agreement that is politically saleable on both sides of the Atlantic might look like. It’s a work in progress. What all of our former trade negotiations could agree on is to caution against the tendency towards “agreement syndrome” — allowing the momentum of the negotiations to cloud judgment about what an acceptable deal should look like.
Meanwhile, negotiators on both sides continue to do what they do best: finding solutions where there aren’t any just yet.
Phil Rourke is the executive director of the Centre for Trade Policy and Law (CTPL), a leading research and training centre on trade issues jointly sponsored by Carleton University and the University of Ottawa.
