What the Canada-EU Trade Deal Means for Canadian Companies
At the end of October, Canada and the European Union signed an historic trade pact that will have tremendous impact on Canadian importers and exporters. While the Comprehensive Economic and Trade Agreement (CETA) took seven long years to negotiate, and still must clear around 40 national and regional parliaments in Europe to fully enter force, we wanted to break down what it will ultimately mean for Canadian companies engaged in trade.
Currently, only 25 percent of EU tariff lines on Canadian goods are duty-free. On the day that CETA enters into force, 98% of EU tariff lines for Canadian goods will be duty-free, and an additional one percent will be eliminated over a seven-year phase out period. When CETA is official, Canada will be one of the few countries in the world to have guaranteed preferential access to the world's two largest economies - the US and the EU. Now that's exciting!
What Does CETA Mean for Canadian Exporters?
For Canadian exporters, CETA changes the game in several ways:
- Almost complete elimination of EU tariffs will provide increasingly better competitive market access terms for Canadian-manufactured goods.
- Canadian exporters will have clearly-defined and favourable rules to determine which goods are considered "made in Canada," and therefore eligible for preferential tariff treatment.
- Cooperation and information sharing between Canadian and EU regulators will facilitate more compatible regulatory measures, making it easier for Canadians to do business in the EU.
- Canadian opportunities to bid on opportunities at all levels of the EU government procurement market, which is worth an estimated $3.3 trillion annually.
What Does CETA Mean for Importers?
Since Welke Customs Brokers operates on the import side, we are excited about the opportunities that CETA will afford to our customers through greater, less-expensive and more expedient access to EU goods.
With diminished or no duty on imported goods from the EU, Canadians will see more European products available at more affordable prices. Under the trade deal, bigger-ticket items, such as German-made cars, will also be available at lower prices in Canada, making Canada a much more attractive market. Likewise, components to be integrated into Canadian-manufactured goods will be much more easily accessible and cost-advantageous, increasing opportunity and jobs for Canadian firms.
An important component of CETA is strengthening and simplifying Customs procedures in an effort to reduce time at the border. In international trade, time is money, so we see it as a worthwhile, forward-thinking concept to include process improvements as part of the discussion within the agreement. Some of the commitments of CETA include:
- Providing importers/exporters with all the information they need on importing or exporting, including advance rulings on the origin of goods or tariff classification;
- Simplifying and, where possible, automating border procedures;
- Respecting the privacy of company information collected for Customs purposes; and
- Providing an impartial and transparent system for addressing complaints about Customs rulings and decisions where differences of opinion may occur.
A joint Canada-EU study concluded that CETA could increase bilateral trade by 20%, and boost Canada's income by $12 billion, annually. The study also suggested the economic benefit of the agreement would be equivalent to creating almost 80,000 new jobs or increasing the average Canadian household's annual income by $1,000.
We call that good news for Canadians and Canadian companies!