Thank you very much. Good morning, everyone.
My name is Steve Verheul. I'm Canada's chief trade negotiator for the Canada-European Union Comprehensive Economic and Trade Agreement, or CETA. I'm pleased to be here today to participate in this technical briefing on CETA.
I'll begin with a brief overview of the EU market and then turn to what we see as the opportunities that CETA will create, both for Canada's business community and by extension for the Canadian economy. I will then provide you with an outline of the next steps toward bringing the agreement into force.
The EU represents the world's largest market, with a $20-trillion economy and more than 500 million consumers. It is a key market for global supply chains. The EU has more Fortune 500 companies than anywhere else in the world, including the United States. This significant access to supply chains is an important avenue of opportunity for the global ambitions of many of Canada's small and medium-sized enterprises.
CETA will provide Canadian companies with a first-mover advantage over competitors from markets like the U.S. that do not have a trade agreement in place with the EU. In fact, Canada is gaining preferential access to almost a quarter of the world's marketplace by way of CETA. With CETA and NAFTA combined, Canada will have preferential access to close to half of the world's marketplace.
I'll now provide you with an overview of the structure and content of the agreement.
As of today, only 25% of EU tariff lines on Canadian goods are duty free. On day one of CETA's entry into force, 98% of these tariff lines will be duty free. Once all phase-outs are complete, seven years after entry into force, this will rise to 99%.
Tariff elimination will provide enhanced export opportunities into the EU market for Canadian producers, processors, and manufacturers for agricultural and agri-food products, fish and seafood, forestry goods, and the full range of industrial goods.
For regional sectors like fish and seafood, agriculture, and forestry, CETA offers significant new opportunities for growth in exports of Canadian value-added products.
The EU generally applies higher tariffs on imports of value-added finished goods than on raw materials and natural resources. As such, the elimination of tariffs under CETA creates enhanced export opportunities for Canadian value-added goods into the EU market, and therefore provides incentives for more processing and manufacturing in Canada.
Commitments for market access for goods also include provisions to ensure the non-discriminatory treatment of Canadian goods in the EU market, to limit restrictions on exports and imports, and to establish a committee to discuss issues impeding trade in goods that may arise as a means to solve problems and avoid disputes before they occur.
Rules of origin and origin procedures serve to determine when a good is originating and therefore eligible for preferential tariff treatment when exported from one party to another under CETA. The rules of origin that we have negotiated reflect Canadian production realities, in particular the integrated nature of North American supply chains.
Of particular note, the agreement includes an origin quota for automobiles, under which up to 100,000 Canadian-made automobiles a year could benefit from the phased elimination of the EU's current 10% tariff.
The procedures for making claims for preferential tariff treatment are clear, simple, and similar to those included in Canada's other agreements.
In addition, CETA commitments on customs and trade facilitation are designed to reduce processing times at the border and make the movement of goods cheaper, faster, more predictable, and efficient.
CETA will assist Canadian exporters by, for example, providing businesses with advance rulings on the origin or tariff classification of their goods and by simplifying and automating border procedures whenever possible.
Provisions on technical barriers to trade will help to ensure that unnecessary or discriminatory regulatory requirements do not diminish the value of new market access for Canadians. CETA builds on existing rules contained in the WTO agreement on technical barriers to trade and provides a number of ways to address issues and prevent problems arising from these types of barriers.
CETA is the first bilateral trade agreement in which Canada has included a stand-alone chapter on regulatory co-operation, which seeks to enhance co-operation and information sharing while regulations are being developed.
CETA also includes a protocol on conformity assessment, which will allow Canadian companies in a number of sectors to have their products tested and certified here in Canada for the EU market. This is a significant innovation that will save companies time and money, and it will be particularly useful to small and medium-sized enterprises.
CETA is also expected to open doors to the EU's $3.3 trillion government procurement market. Under the WTO agreement on government procurement, the GPA, Canadian companies already enjoy access to some opportunities tendered by EU-level institutions and the 28 EU member state governments. CETA improves this access by removing exclusions in the GPA on procurement by specific EU entities. In addition, CETA provides Canadian suppliers with new access to procurement by sub-national entities, such as regions and municipalities, and to utilities.
Beyond goods, CETA sets out rules in relation to trade in services. These include a cross-border trade in services chapter that will provide for better market access assurances and open markets in the EU countries in sectors such as professional services, environmental services, construction services, and research and development.
CETA also contains robust provisions on domestic regulations, which will provide for greater predictability and transparency. Canadian service providers will benefit from the greatest access to the EU, the world's largest importer of services, that has ever provided in a trade agreement, as well as the most ambitious commitments on temporary entry that the EU has ever agreed to as well.
The temporary entry chapter includes commitments to facilitate mobility between Canada and the EU for mutually agreed categories of business persons such as after-sales or after-lease services, professionals, and key personnel such as intracorporate transferees and investors. For example, in some countries and for some services, entry will not require a work permit for 90 days in any six-month period for activities such as meetings or consultations, marketing research, trade fairs, sales, or purchasing. In certain member states, high-skilled contract service suppliers may benefit from more open and transparent temporary entry commitments, compared to the EU's existing commitments under the WTO general agreement on trade and services. CETA also includes rules on intellectual property, on competition, on state-owned enterprises, and on sustainable development.
Canada and the EU have also committed to high levels of environmental and labour protection and to the strong enforcement of these protections. Canada, for the first time, directly incorporated commitments into the text of the agreement that would help ensure that trade in environmental protection would be mutually supportive and reinforcing, and that the increased prosperity resulting from liberalized trade would not occur at the expense of the environment.
Comprehensive labour provisions have been included in CETA to ensure free trade with the EU does not erode labour standards. CETA's commitments with respect to labour provide additional assurances that high standards of labour protection will be maintained as bilateral trade increases following the agreement's coming into force. For the first time in any trade agreement, all provinces and territories have signed on to the labour and environmental chapters in CETA.
As for the current status, as you know, Canada and the EU have completed the legal review of the English text. This was announced by Minister Freeland and her EU counterpart, trade commissioner Malmström, on February 29.
As I mentioned to this committee a few weeks ago, revisions to the investment protection and investment dispute resolution provisions were made as part of the legal review process. These revisions include strengthened provisions on the right to regulate for all levels of government, a revised process for the selection of tribunal members to adjudicate disputes—most notably, investors will no longer be able to choose members of the tribunal on their own—more detailed commitments on ethics for tribunal members, and the establishment of an appellate mechanism that will become operational only after Canada and the EU agree to the administrative and operational aspects of how this would function.
The changes do not decrease the level of protection afforded to investors under the agreement. Investment forms a substantial portion of the Canada-EU economic relationship. The known stock of direct investment by Canadian companies in the EU totalled $166 billion in 2014, representing about 20% of known Canadian direct investment abroad. The same year, the known stock of direct investment from European companies in Canada totalled $215 billion, representing over 29% of known total foreign investment in Canada.
Trade in investment is distinct from trade in goods or in services and operates under distinct regulations. CETA's investment chapter is designed to give investors greater certainty, stability, transparency, and protection for their investments, and to secure access for Canadian and European investors to each other's respective markets.
At the same time, the agreement's provisions will not prevent governments from acting in the public interest, such as regulating in the areas of health and safety and, as I mentioned earlier, labour and the environment. This understanding has been strengthened in CETA by including clarification language regarding the government's right to regulate.
CETA also sets out a mechanism for the resolution of investment disputes among investors and states to provide investors with recourse to compensation for alleged breaches of investment protection obligations, including in cases of discrimination or expropriation.
In CETA, Canada and the EU have made changes to the process governing the functioning of investment tribunals, increasing the level of transparency and impartiality of the mechanism and its tribunal members.
Finally, with respect to the next steps in the process, Canada and the EU are now proceeding with finalizing the legal review of the French text, as well as the texts of the 21 other EU treaty languages. This should be complete in the coming months, which will then allow us to move forward with our respective domestic ratification processes.
Canada and the EU are committed to seeing CETA signed this year, in 2016, and to its entry into force in early 2017.
I would now be happy to take any questions you may have.
Mr. Chairman, thank you.