Written QeA to EU Commission – CETA provisional application?

Question for written answer to the Commission
Dietmar Köster (S&D) – 16th February 2015

Subject:  ‘Provisional application’ of the CETA

Many ordinary Europeans are concerned about the implications of the CETA and TTIP free trade agreements.

It recently emerged that as a result of a ‘provisional application’ decision by the European Council sections of the CETA will become binding under international law even though they have not been approved by the parliaments of the EU Member States.

1. Which sections of the agreement are involved?

2. Do these include the provisions on ISDS?

Answer given by Ms Malmström on behalf of the Commission – 27th April 2015

Article 218(5) of the TFEU attributes to the Council the possibility to decide on the provisional application of international agreements to be concluded by the Union.

For the time being, none of the provisions of the Comprehensive Economic and Trade Agreement (CETA) with Canada are being provisionally applied as the text of the agreement is being legally revised.

The Council will take a decision on the signature of CETA on the basis of a proposal from the Commission and, if warranted, will also decide on its provisional application.

It is important to note in this context that Commissioner Malmström has declared in writing to the INTA Committee that, ‘(e)ven if the power to decide on provisional application lies with the Council, (…) I am ready, when proposing decisions to sign politically important trade agreements which fall under my responsibility, to ask the Council to delay provisional application until the European Parliament has given its consent’. It is also to be noted that, in recent years, several important trade agreements were provisionally applied only after the European Parliament had given its consent.

(Source: EU Parliament)

EU-Canada Free Trade Agreement

On 18 October 2013, EU and Canada have reached a political agreement on the key elements of the Comprehensive Economic Trade Agreement (CETA). The agreement will remove over 99% of tariffs between the two economies and create sizeable new market access opportunities in services and investment. At a later stage, the agreement will need to be approved by the Council and the European Parliament.

Once implemented, the agreement is expected to increase two-way bilateral trade in goods and services by 23% or €26 billion, fostering growth and employment on both sides of the Atlantic.

Some economic data:

  • In 2012 Canada was the EU’s 12th most important trading partner, accounting for 1.8% of the EU’s total external trade. Based on 2011 figures, the EU was Canada’s second most important trading partner, after the US, representing 10.4% of Canada’s total external trade.
  • The value of bilateral trade in goods between the EU and Canada was €61.8 billion in 2012. Machinery, transport equipment and chemicals dominate the EU’s exports of goods to Canada, and also constitute an important part of the EU’s imports of goods from Canada.
  • The economic model of the Joint Study  predicts annual real income gains of approximately €11.6 billion for the EU and €8.2 billion for Canada within seven years following the implementation of an agreement.
  • Total EU exports to Canada are estimated to go up by 24.3% or €17 billion, while Canadian bilateral exports to the EU are predicted to increase by 20.6% or €8.6 billion.
  • 50% of the total expected gains for the EU are related to trade in services, 25% to the removal of tariffs and the remaining 25% of the GDP gains can be reached by the dismantling of Non-tariff barriers (NTB).

The main sector involved, talking about food, are the dairy sector, fruit and vegetables, oils, processed foods and shellfish. On the European side the news has create great enthusiasms, but in Canada the reaction seems to be not the same!

Canadian, in the Joint Study, emphasized that NTBs are a particular irritant with respect to meat exports (beef, pork, etc.) and that specific technical barriers include the EU’s Third Country Meat Directive (requirements for production plant standards and meat hygiene standards) and the EU’s ban on hormones in livestock production.  But, if the meat sector is trying to find a solution to the old disputes, establishing quotas for the import in EU (without hormones…), and the oilseed, wheat and barley producers seem quite happy about the deal, the dairy sector is really upset.

In December 2007 Canada published the final amendments to its Food and Drug Regulations and Dairy Products Regulations on compositional standards for cheese. The new standards were perceived by EU exporters as creating unnecessary obstacles to trade. On the other hand, as indicated in the Regulatory Impact Analysis Statement attached to the Regulation, the new standards were expected to lead to higher returns for Canadian milk producers.

Particular concerns were raised by the EU stakeholders about the licensing requirements and the provisions as regards the casein content of the milk and total protein content of cheese ratios and their definitions.

I am not aware of the technical details, that have to be defined in the final text, but the Dairy Farmers of Canada (DFC) is strongly asking the withdrawal of the agreement, assessing that:

  • The deal would displace local products with subsidized cheeses from EU and risk Canadian small businesses being shut down or put out of business;
  • The EU already has a large proportion of the Canadian cheese market. Canada’s TRQ already allows imports of 20,412 tonnes of cheese tariff-free. Two-thirds of that is already allocated to the EU;
  • Consumers will not see any difference in price as a result of this CETA giveaway as the vast majority of EU cheese already comes into Canada with little or no tariffs.

I will forward this post to some friends in Canada for more insights, but I’d love to gather a comment from anyone has more information about this dispute!