CETA: the EU-Canada free trade agreement

The Comprehensive Economic and Trade Agreement (CETA) is a free trade agreement between the EU and Canada. CETA has been in force provisionally since September 2017. Most, but not all, of the agreement is in force.

CETA removes all tariffs on industrial products traded between the EU and Canada. Most were removed when the agreement came into force provisionally. All will be removed within seven years. There is substantial liberalisation of trade in agricultural products. EU businesses will be allowed to bid for public procurement contracts in Canada.

The European Commission has put CETA forward as a “mixed agreement” which must be ratified by each EU Member State in addition to the European Parliament. This process could take a number of years. In the UK, the agreement must be laid before Parliament for a period of 21 sitting days. The agreement can only be ratified if the 21 day period has passed without either House having resolved that it should not be ratified. In the event of such a resolution by the Commons, a further period of 21 days is triggered during which the Commons can again raise objections. The Government announced on 21 May 2018 that it would soon be starting the formal ratification process in the UK. CETA was laid before the House of Commons on 13 June 2018. There was a House of Commons debate on CETA on 26 June 2018. The UK ratified CETA on 8 November 2018.

The agreement has been provisionally implemented since 21 September 2017, bringing most, but not all, of the agreement into force. The Commission has said that the controversial Investment Court System provisions will not be provisionally applied. They will not, therefore, come into force unless CETA is ratified by Member States.

Those in favour of CETA argue that it will boost trade between the EU and Canada. CETA has been described by the European Commission as “a milestone in European trade policy” and “the most ambitious trade agreement that the EU has ever concluded.” The European Commission argues that criticisms of the investment provisions are unfounded, claiming that CETA protects governments’ right to regulate and that the proposed Investment Court System is a fairer and more transparent replacement for the widely criticised Investor State Dispute Settlement (ISDS) provisions.

Critics argue that the agreement is unduly favourable to business and may lead to a lowering of regulatory standards. Opponents of CETA remain unconvinced by the reforms to the investment provisions, arguing that these give foreign investors special privileges and may deter governments from legislating in the public interest for fear of litigation. The Belgian government has asked the Court of Justice of the European Union for an opinion on the compatibility of CETA with EU law. In April 2019, the CJEU ruled that CETA was compatible with EU law. There have also been criticisms of the process of ratifying trade deals – in particular that CETA has been “provisional applied” – ie before parliaments in EU Member States have had a chance to ratify it.

While the UK remains in the EU, it will be subject to CETA’s provisions. The draft Withdrawal Agreement also envisages the UK being subject to the obligations of the EU’s trade agreements during the transitional (or implementation period). The Government is seeking to roll over the EU’s existing trade agreements with third countries into equivalent UK agreements. A number of agreements have been rolled over but not CETA has yet to be rolled over.