World Economy

Canada, EU Sign CETA Pact Despite German Concerns

Canada, EU Sign CETA Pact Despite German ConcernsCanada, EU Sign CETA Pact Despite German Concerns

After five years of drawn-out negotiations, Canada and the European Union have finally put pen to paper, creating one of the world’s largest free-trade blocs, while at the same time downplaying concerns over a possible negotiating rift with Germany.

Prime Minister Stephen Harper played host to EU leaders on Friday, under the banner of their regular summits, but clearly planned to highlight the signing of the Comprehensive Economic and Trade Agreement (CETA) and the long-awaited public release of the massive document.

“Over the decades there have been many Canada-EU summits. This summit, however, truly marks the start a new era in Canada-EU relations,” Mr. Harper said during a news conference in Ottawa.

“The Canadian-EU trade agreement is deeper in substance and broader in scope than any such other agreement in Canadian history,” said Harper, standing along side European Commission President Manuel Barroso and European Council President Herman Van Rompuy in one of the stately meeting rooms on Parliament Hill.

“By giving Canadian exporters preferential access to the EU’s 500 million affluent customers, this agreement will reshape our commercial relationship with the world’s single largest market place,” Mr. Harper said. “On it’s own, therefore, it is a game-changer.”

 CETA Pact

The CETA pact, approved in principle last October, will overtake the North American Free Trade Agreement — which came into effect in 1994 — as Canada’s biggest cross-border deal.

CETA is set to begin in 2016. When fully implemented, the agreement is expected to increase two-way trade in goods and services between Canada and the 28-nation EU by 23%, or $36.8-billion, or 26-billion euros.

Under NAFTA, 29% of the then-existing tariffs were removed on the first day of the deal. With CETA, that initial figure will be closer to 98%.

“Canada is the first G7 partner with which we are signing a free-trade agreement,” Mr. Barroso said.

“The European Union is Canada’s second-largest trading partner. The European Union is the second-largest investor in Canada. Canada is the fourth-largest investor in Europe Union,” he said.

“This opens a new chapter in European Union-Canada relations.”

But CETA is not unlike NAFTA — grouping Canada with the United States and Mexico — in attracting criticism within the borders of negotiating countries over the perceived loss of state authority.

 Germans Opposed

Some German officials are reportedly opposed to the investor-state dispute settlements (ISDS) clause of the CETA document which they say encroaches on the ability of countries to deal with some foreign investment issues — such as those regarding labor laws and environmental protection. In particular, there are worries that ISDS provisions could lead to foreign operators challenging domestic rules in independent tribunals.

But Barroso said the CETA declaration “was fully backed by all member states of the EU, including Germany.”

“So, until now, all of the official communications that we received from Germany were absolutely in favour of this agreement,” he said.

“I think that in Europe, the country that is going to benefit the most from this agreement is indeed Germany — as the biggest economy, as the biggest exporter. So it is quite obvious.”