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12 June 2009
On May 6 2009 at the Canada-EU Summit in Prague, Czech Republic, Canadian Prime Minister Stephen Harper, along with EU President Mirek Topolánek and European Commission President José Manuel Barroso, announced the historic launch of negotiations towards an economic partnership agreement between Canada and the European Union. The negotiations will be guided by a joint 'scoping exercise' that culminated in the Joint Report on the EU-Canada Scoping Exercise, which outlines those areas proposed by both parties as subjects for upcoming negotiations.
The joint report notes that the "well-being and prosperity of the [European Union] and Canada depend on healthy international trade and investment relationships", citing the facts that the European Union is the world's largest exporter of goods and services, and that one in five Canadian jobs is estimated to be linked to trade.
While both parties state their commitment to advancing the Doha round of multilateral negotiations at the World Trade Organization (WTO), they note a shared interest in strengthening their bilateral economic partnership. Currently, this bilateral relationship is governed by a cooperative framework established in 1976. Both parties are now seeking an ambitious, comprehensive and binding single economic agreement to replace the 1976 framework.
The joint report indicates that commitments under this new agreement should go beyond existing WTO levels and include, at a minimum, all chapters of the most ambitious EU and Canadian bilateral economic agreements to date.
The joint report sets out 15 topics which the scoping exercises yielded as subjects for discussion in the upcoming negotiations.
Trade in goods
The joint report indicates that the level of any tariff elimination should be considerably more comprehensive and ambitious than that required by Article XXIV of the General Agreement on Tariffs and Trade, and that no tariff lines should be excluded a priori. The agreement should also include clear rules of origin that:
Sanitary and phytosanitary issues
While building on the WTO Agreement on Sanitary and Phytosanitary Measures is a priority of the parties, they further recommended the establishment of a mechanism to address specific issues not covered in the existing Canada-EU Veterinary Agreement.
Technical barriers to trade
Provisions on the topic of technical barriers to trade should "reaffirm, build on and enhance" existing WTO provisions, notably in the areas of transparency, international standards, technical regulations and conformity assessments. The development of a mechanism to deal with technical barriers to trade was also proposed.
The objectives of trade facilitation negotiations will be efficiency, transparency, cooperation and consultation. The parties have expressed the view that the challenges faced by small and medium-sized enterprises should be taken into consideration in negotiations.
The goal of negotiations in respect of customs procedures will be to formulate rules of origin that are effective and transparent in their administration. The parties will also take into account the existing EU-Canada agreement on customs cooperation and mutual assistance in customs matters in an effort to avoid duplication.
Cross-border trade in services
The parties are hoping to achieve substantial sectoral coverage in terms of liberalizing trade in services. Negotiations in this connection are expected to be considerably more ambitious than the existing WTO commitments and involve issues of market access, non-discrimination and compliance with Article V of the General Agreement on Trade in Services. The joint report also indicates that the agreement will contain provisions in respect of the mutual recognition of professional qualifications.
Canada and the European Union have expressed a desire to increase bilateral investment flows between the two jurisdictions. The joint report notes that provisions in the agreement regarding investment should cover pre and post-establishment in all sectors, and should include substantive and procedural obligations at central and sub-central government levels.
As a starting point for negotiations, the parties will look to the procedural commitments contained in the November 2007 revised text of the Government Procurement Agreement. They intend to improve access to public procurement markets in all sectors, ensuring treatment no less favourable than that given to local suppliers, and to increase transparency.
The parties wish to avoid "unnecessarily divergent" regulatory approaches and propose regulatory cooperation in specific areas to complement the voluntary framework that is already in place.
The parties noted that any agreement should substantially improve on all categories of IP rights where needed beyond the minimal protection afforded under the relevant WTO agreement (the Agreement on Trade-Related Aspects of Intellectual Property Rights), and should also cover geographical indications.
Movement of persons
The joint report notes that provisions on the legitimate temporary movement of persons related to bilateral trade and investment should be included as a topic in negotiations.
Competition policy and other related matters
The joint report notes that exploratory talks aimed at improving the exchange of information between competition authorities are already underway. The existing agreement between the parties on the application of their competition laws forms the basis for cooperation and any future agreement should include related disciplines (eg, state aid).
Institutional arrangements and dispute settlement
According to the parties, provisions on the topic of institutional arrangements and dispute settlement should include a binding state-to-state dispute mechanism, as well as appropriate mediation mechanisms.
Provisions on environment, labour rights and corporate social responsibility standards were identified by the parties as being appropriate. The joint report also notes the desirability of early liberalization of environmental goods and services.
This residual category heading was formulated by the parties to provide for some flexibility in the scope of the agreement, permitting expansion where there is mutual interest in doing so.
While there appears to be a great deal of optimism surrounding the negotiations, one possible stumbling block may be the European Union's early insistence that all provinces and territories sign up. While the vast majority have publicly supported these negotiations, the premier of Newfoundland and Labrador has voiced concerns over the federal government's protection of Newfoundland's interests. The premier's concerns may be attributable to political tension between the premier and the Canadian prime minister, or EU movement towards imposing a regional ban on seal products and high tariffs on seafood.
The European Union is Canada's second-largest export market and second-largest investor (surpassed only by the United States). Canada is the European Union's fourth-largest source of foreign direct investment and two-way trade in merchandise reached C$90.4 billion in 2008. A 2008 joint EU-Canada study estimates that this agreement could increase bilateral trade by more than 20% in the space of a few years. Thus, any agreement on these 15 issues is expected to have significant ramifications for both parties.
For further information on this topic please contact Greg Kanargelidis at Blake Cassels & Graydon LLP's Toronto office by telephone (+1 416 863 24 00) or by fax (+1 416 863 2653) or by email (email@example.com). Alternatively, contact Elysia Van Zeyl or Kathryn Aubrey-Horvath at Blake Cassels & Graydon LLP's Ottawa office by telephone (+1 613 788 2200) or by fax (+1 613 788 2247) or by email (firstname.lastname@example.org or email@example.com).
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Elysia Van Zeyl