Third anniversary of CETA
We approach the third anniversary of the provisional application of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) at a time when the issues of globalization and free trade agreements have become even more controversial than normal. The COVID pandemic has disrupted global supply chains with product shortages and delays, leading to increased calls to repatriate critical industrial production. Given the threats that Canada has faced in recent months regarding access to crucial PPE, it stands to reason that governments will take steps to prevent or minimize the risk of such disruptions in the future, including increased domestic production of vital products. Canadians have seen firsthand the potential risks of becoming overly dependent on certain outside sources that may cut us off for various reasons during crises or for political reasons.
Against this backdrop of increasing economic nationalism, why is CETA’s anniversary noteworthy; is CETA even important to the future economic well-being of our country?
To answer these questions, it is necessary to recognize that a key theme of Canadian trade policy has long been the importance of diversifying export markets, still critical for many Canadian businesses and their workers. During past, normal, US Administrations, whether Democrat or Republican, many people expressed strong concerns about the over–reliance on the US market for Canadian exports. With the current unusual Administration, we have seen the costs of such a heavy reliance on the US market with damaging, arbitrary attacks on Canadian exports such as steel and aluminum, disregard for international treaties, etc. Under these volatile circumstances, having secure, alternate outlets for Canadian exports becomes even more crucial.
Looking back at past efforts to achieve an alternate market with Europe, there were many failures and false starts, such as Pierre Trudeau’s Third Option approach. Former Liberal Minister Roy MacLaren was for many years a “lone” voice calling for a free trade agreement of sorts with Europe. During most of my lengthy trade policy career with what is now Global Affairs Canada (GAC), the idea of an FTA with Europe was widely dismissed as impossible, in some cases right up to the point when the provisional agreement came into effect in September 2017.
Early on during the Harper Government, I attended a meeting in Brussels between then Canadian Trade Minister David Emerson and his EU Commissioner counterpart Peter Mandelson. Minister Emerson surprised Mandelson by announcing, politely of course, that Canada was no longer going to waste its time spinning wheels with the EU trying to agree to a very modest effort to modernize the bilateral relationship; we were too busy pursuing real opportunities with other countries to waste resources on this non-starter. European inaction with respect to Canada was not unusual - Canada was not being singled out by the EU. At this point in time the Doha multilateral talks in Geneva were still ongoing, albeit slowly, and the EU was not seriously pursuing bilateral or regional trade agreements with many developed countries. Emerson’s announcement just removed any pretense that the EU was engaged in anything concrete with Canada.
Shortly after Emerson’s meeting, in early 2007, former Quebec Premier Charest started to publicly talk about the importance of a possible trade agreement with Europe. This issue was subsequently discussed at one of the quarterly Federal-Provincial-Territorial (FPT) meetings of senior trade policy officials that I had the occasion to Chair. Agreement was reached that the “Feds” should explore whether there was any prospect of a “real” comprehensive agreement, one that included improved access for agricultural commodities.
Canada-EU trade negotiations were formally launched in May 2009 at a Canada-EU Summit, with the very capable Steve Verheul appointed as Canada’s Chief Negotiator. The successful outcome of these lengthy negotiations resulted in the provisional application of CETA starting three years ago, to the benefit of both Canada and the EU.
But if you had taken a poll of trade policy experts in early 2007 after the aforementioned FPT meeting, I know that the vast majority (including most of my bosses) would never have imagined that Canada would even be able launch negotiations let alone successfully conclude an agreement with the EU. I am an optimist by nature, but based on the previous track record, even I would not have put any real money on our chances of success. But Canada was successful, and I believe that this is why.
The Canadian side understood that if we were going to overcome the stated categorical refusal of the EU Commission (DG Trade) to even contemplate starting negotiations with Canada, we needed to convince EU Member States and European business. Working closely with our EU based embassies and missions, particularly in Brussels, under the overall leadership of the then Deputy Minister of Trade Marie-Lucie Morin, my small team and I lobbied European interests extensively over many months setting out the rationale for starting trade negotiations. We were ably assisted by key Canadian business leaders as well as the provinces and territories. At the same time as this coordinated high level lobbying effort was underway, the broader trade environment was changing. Efforts to conclude the Doha Round were failing and the EU was facing a situation where other major developed countries were gradually expanding their bilateral/regional trade networks. The EU’s reluctance to engage seriously in bilateral trade negotiations was weakening at a time when Canada was knocking on many doors inside Europe expressing a willingness to start. In this regard, European business, German business in particular, was especially important to our successful advocacy efforts as they perceived potential benefits from a bilateral agreement with Canada.
Two reasons why the EU was reluctant to start negotiations with Canada were a) the perception that Canada was unwilling to put everything on the table and take politically difficult decisions required to conclude a deal; Canada’s dairy policy was often cited, and b) the perceived absence of real benefits of such an agreement to the much larger EU. To address the latter, we got them to agree to carry out a joint economic study to assess, academically, the potential benefits of comprehensive Canada-EU FTA. This study, available on the GAC website, demonstrated that there were significant potential benefits for both sides. We quoted this joint study frequently during our lobbying efforts.
To address the perception that Canada was not willing to put everything on the table, we repeatedly made it crystal clear that we were prepared to discuss everything, without pre-conditions. This is best spelled out in the so-called “scoping” document that Canada and the EU concluded prior to the official start of negotiations setting out the agreed breadth of the talks. Canada would not pre-judge the outcome of the future talks, but everything, including dairy and provincial measures (e.g., government procurement), was open to discussion. Federal authorities worked closely with the provinces and territories to ensure that we were not over-promising. Participation by senior provincial representatives during key lobbying efforts was helpful in this regard.
We steadily addressed every reason DG Trade and Member States raised questioning why an FTA was needed, including the name of the initiative itself. One key Member State insisted that we could not call it a free trade agreement since, to them at least, an FTA label did not signal the modern comprehensive agreement they were looking for. Therefore, we ended up with the name CETA.
By any trade policy standard, CETA is a superb modern agreement and much of its agreed language and approaches will be re-cycled elsewhere, for example in a future Canada-UK trade agreement. Some early benefits have already been realized, and if Canadian and EU business take full advantage of CETA, this historic agreement will be shown to be an important milestone in Canadian economic policy.