Author: Stephen Solomon and Antoine Michaud-Soret, Canadian and international tax law specialists, Interlaw
31 Jul 2019
In a world that is constantly struggling with a rising number of protectionist policies, while also witnessing the strengthening of ties between new, emerging economies and well-established ones, major trade deals can bring one business increased success while dealing another more competition.
By reducing or eliminating barriers to trade, many deals stand to deliver a significant boost to economic activity. The latest to be struck – the Canada-EU Comprehensive Economic and Trade Agreement (CETA) – could have a major impact on countries located on both sides of the Atlantic.
Breaking down barriers
In 2016, the value of trade between Canada and the EU stood at €64.3bn. As such, it is no surprise that both regions are getting excited about the fruits the deal could bear. CETA represents a unique opportunity for the two regions to strengthen and develop their economic bond, and to shift Canada’s commercial reliance away from the US and towards the EU. However, whichever side of the ocean a company falls on, it is important for businesses to understand the many impacts of CETA.
The implementation of CETA is expected to spur a significant boost in transatlantic trade and new subsidiaries in both Canada and the EU
This new, progressive trade agreement focuses primarily on eliminating or reducing the tariff and trade barriers between Canada and the EU. CETA also seeks to facilitate greater access between the economic markets of both regions and accelerate the launch of new products in each jurisdiction.
Most notably, CETA will decrease duty fees and reduce tariffs by up to 98 percent. The agreement will also standardise regulations and procedures, thus improving market access in both directions.
Other advantages of CETA include greater access to public contracts and services and new rules to establish the country of origin of imported and exported goods. It will also facilitate the promotion and protection of foreign investments (such as dispute resolution mechanisms) and an increase in labour mobility.
The implementation of CETA is expected to spur a significant boost in transatlantic trade and new subsidiaries in both regions. Experts forecast that Canadians will considerably increase investments made in the EU, which already represent more than 22 percent of the country’s total direct foreign investments.
These investments are expected to encourage market growth, particularly in the financial services, automotive, aerospace, transport and corporation services industries. They will also lead directly to the creation of new jobs in CETA member countries.
With the EU representing a market of 500 million consumers, research led by both regions concluded that CETA would help Canada’s annual revenue increase by CAD 12bn (€8.2bn). This would lead to an annual increase in bilateral trade between the two regions of nearly 12 percent, which would help create more than 80,000 new jobs.
From a European standpoint, the trade agreement is expected to trigger a strong rise in exports to Canada for industries such as telecommunications, environmental services, container transportation and dredging, as well as in service industries such as engineering and accounting.
Furthermore, the trade agreement will allow European corporations to bid in Canadian public markets, which represent a market value of more than €30bn. European groups will have the opportunity to participate in the Canadian Government’s bidding process, as well as those of the Canadian provinces and cities.
At Interlaw, we anticipate an increase in European exports of goods and services in industries such as construction and Canadian road infrastructure modernisation. European corporations will soon have access to a unique portal with information on the publication of the different public bidding offers that are available.
As the first economic impacts of CETA come through this year, Canada’s movements towards a greater economic partnership with the EU will be made clear.
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