Ottawa, Ontario
26 September 2014
The Government of Canada’s top priority is to create jobs and opportunities for Canadians in every region of the country. A key part of this goal is ensuring that Canadian businesses and investors have the tools, market access and support they need to be globally competitive and prosperous.
The most recent Speech from the Throne committed to concluding negotiations on a Canada–European Union (EU) Trade Agreement to benefit hardworking Canadians and businesses, especially our crucial small and medium sizes enterprises (SME) and industries across the country. The Canada–EU Trade Agreement delivers on that commitment.
To this end, and following the agreement in principle announced by Prime Minister Stephen Harper and José Manuel Barroso, President of the European Commission, in October 2013, Canada and the EU announced on August 5, 2014, that officials had reached a complete text on a Canada–EU Trade Agreement marking the end of negotiations.
On September 26, 2014, Prime Minister Harper welcomed Herman Van Rompuy, President of the European Council, and European Commission President Barroso to Parliament Hill where the three leaders celebrated the historic conclusion of negotiations of the Agreement. The leaders also released the negotiated text of the Agreement in English and French, which follows on Canada’s commitment to transparency and openness.
Once it enters into force, the Agreement will provide Canada with preferential market access to the largest and most lucrative integrated market in the world, a market of more than 500 million consumers that generates almost $18 trillion in economic activity annually. In fact, a joint study conducted with the EU, which supported the launch of negotiations, concluded that an agreement could boost Canada’s income by $12 billion annually and bilateral trade by 20 per cent. This is equivalent to creating almost 80,000 new jobs or increasing the average Canadian family’s annual income by $1,000.
Canada will be one of the only developed countries in the world to have guaranteed preferential access to more than 800 million consumers in the world’s two largest economies, the EU and the United States.
Benefits by Sector
Canadian workers in sectors across every region of the country stand to significantly benefit from increased access to this lucrative 28–member state market. Some of the sectors that stand to gain include:
Advanced manufacturing
Canada is a world leader in the research, innovation and production of a broad range of manufactured products, including industrial and power–generating machinery; aerospace and rail products; agricultural and construction equipment; medical devices; and scientific and precision instruments. This industry employed almost 418,000 Canadians and contributed $42.7 billion to Canada’s gross domestic product (GDP) in 2013.
Canadian exports of manufactured products to the EU are led by aerospace and rail products, machinery and equipment, medical devices, and scientific and precision instruments. These exports of advanced manufacturing products to the EU face tariffs reaching as high as 22 per cent on some products.
Upon entry into force, the Canada–EU Trade Agreement will eliminate the vast majority of existing EU tariffs on advanced manufactured products, including those on electrical parts and equipment (as high as 14 per cent) and medical devices (as high as 8 per cent). Minimizing the impact of technical barriers will also help maximize market access for our exports, so the Agreement includes provisions that will help Canada and the EU find ways to either prevent the imposition of non–tariff barriers or address them if they do arise.
From aerospace and auto parts centres of excellence in Quebec and Ontario, to agriculture machinery and equipment in Saskatchewan, to extractive machinery in Newfoundland and Labrador, manufacturing industry workers across Canada will reap the benefits of new market access achieved under the Agreement.
Automotive industry
The automotive sector is a key driver of Canada’s economy. It employs more than 117,000 highly skilled Canadians across the country, and accounts for 1 per cent of Canada’s total GDP. The Canadian auto industry is highly dependent on trade, with around 85 per cent of auto production exported every year. The Canada–EU Trade Agreement provides historic new market access opportunities for the automotive sector and will allow significant increases of exports to Europe. The removal of tariffs along with flexible rules of origin will benefit vehicle and auto parts producers alike.
For passenger vehicles, the EU’s 10 per cent tariff will be eliminated, providing Canada’s auto makers with a competitive advantage in the EU market that few other countries have. The Agreement will also benefit Canada’s lucrative auto parts sector, not only because the sector will be incorporated into it, but also because it will eliminate EU tariffs on auto parts, which run up to 4.5 per cent. This means that Canadian auto parts producers will have an important advantage over competitors in other countries.
In addition, the Agreement includes rules of origin which reflect Canada’s place within the integrated North American automotive industry. These provisions are designed to work with Canada’s existing supply chains and allow for up to 100,000 passenger vehicles to be exported to Europe duty–free, a twelve–and–a–half fold increase from our current average exports. At the same time, the Agreement encourages “made in Canada” production by granting unlimited preferential treatment to vehicles with higher Canadian content that are exported to Europe.
Finally, the Agreement includes forward looking provisions that allow for the adjustment of the rules of origin to provide additional flexibility in the event that the EU strikes free trade deals with other countries, such as the United States. Taken together, the rules of origin give Canadian producers the opportunity to export to the EU market on a preferential basis now and in the years to come. The Agreement will benefit the automotive industry in Canada, including in Ontario.
Chemicals and plastics
Canada has a thriving, multi–billion dollar chemicals and plastics industry. This industry employed close to 107,000 Canadians in 2013 and contributed $14.1 billion to the Canadian economy. The industry produces inorganic and organic chemicals, as well as resins and plastic packaging and is highly export oriented, with 55 per cent of production exported abroad.
Canadian exports of chemicals and plastics to the EU were worth an average of $2 billion per year between 2011 and 2013. These exports face average tariffs of 4.9 per cent, with peaks of 6.5 per cent.
Upon entry into force, the Canada–EU Trade Agreement will immediately eliminate existing EU tariffs on all chemicals and plastics including plastic floor coverings (from 6.5 per cent); chemicals used in photography (from 6 per cent); and silicon (from 5.5 per cent). Furthermore, as both the EU and Canada are major destinations for foreign direct investment in the chemicals and plastics industry, the Agreement’s investment chapter will increase opportunities for the Canadian chemicals and plastics sector by providing Canadian and EU investors with greater certainty, stability, transparency and protection for their investments.
Whether employed in Ontario – the hub of Canada’s plastics industry – or at leading edge petrochemical facilities in Alberta, Quebec or New Brunswick, workers across Canada in the chemicals and plastics industry will benefit from new market opportunities as a result of the Agreement.
Agriculture and agri–food
Canada’s agriculture and agri–food sector employed approximately 578,000 Canadians in 2013, accounting for 3 per cent of Canada’s GDP.
Canada’s agricultural exports to the EU were an annual average of $2.5 billion between 2011 and 2013, led by wheat (durum and common), soybeans and other oilseeds, and canola oil. Canada is interested in expanding exports of these and a wide variety of products, including meats, grains and oilseeds, fruits and vegetables, and processed foods. Canadian agricultural exports to the EU face high tariff rates, with average EU agriculture tariffs of 13.9 per cent.
Upon entry into force, almost 94 per cent of EU agricultural tariff lines will be duty–free, including durum wheat (up to $190 per ton), other wheat (up to $122 per ton), and oils, including canola oil (3.2 per cent – 9.6 per cent). The Canada–EU Trade Agreement also includes provisions to address non–tariff barriers into the EU, such as those related to animal and plant health and food safety. For example, the Agreement establishes a mechanism under which Canada and the EU will cooperate to discuss, and attempt to prevent or resolve, non–tariff barriers that may arise for agricultural exports.
The Agreement will also provide new market access opportunities for key Canadian agricultural exports: beef and pork. These world–class products will now benefit from preferential treatment in the EU.
The elimination of tariffs and provisions on non–tariff measures for the agriculture and agri–food sector will be of greatest benefit to Alberta, Saskatchewan, Manitoba, Ontario and Quebec.
Food processing
Transforming agricultural commodities into food and beverages is an important part of Canada’s agriculture and agri–food industry, and a key manufacturing sub–sector. In 2013, the food processing industry contributed $27.8 billion to Canada’s GDP. Canadian processors across the country transform primary agricultural goods into value–added products that are consumed, sold, and enjoyed around the world. Between 2011 and 2013, Canadian exports of manufactured food and beverages to the EU averaged $913.3 million. There were approximately 250,000 Canadians employed in this sector in 2013.
Other processed foods face tariffs that are applied based on the quantity of certain ingredients used in the final product. The Canada–EU Trade Agreement will immediately eliminate existing EU tariffs on processed foods and beverages, making these world class items more competitive and creating the conditions for increased sales into the EU.
Forest and value–added wood products
Canada is the world’s leading exporter of softwood lumber, newsprint and wood pulp, and the fifth–largest exporter of wood panels. The industry represents a significant component of the Canadian economy, contributing $19.9 billion to Canada’s GDP in 2013 and employing approximately 217,000 Canadians.
From 2011 to 2013, Canadian exports of forest products to the EU were worth an average of $1.2 billion annually. These exports face average tariffs of 1.2 per cent, with peaks of 10 per cent.
Upon entry into force, the Canada–EU Trade Agreement will immediately eliminate existing tariffs on all forest products, including those on plywood (7 per cent –10 per cent), prefabricated wooded buildings (2.7 per cent), and particle board and oriented strand board panels (7 per cent). Beyond tariffs, the Agreement will establish a bilateral dialogue on forestry products that will support and facilitate Canada and the EU’s trade in forestry products from sustainable and legal sources. It will also serve as a forum to discuss measures that may affect bilateral trade in forestry products.
The Agreement will hugely benefit the forest products sector in Canada, especially in British Columbia, Alberta, Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia.
Metals and mineral products
Canada is a global giant in mineral exploration and mining, producing more than 60 minerals and metals in country, and operating in 100 countries around the world. The metal and minerals industry contributed close to $149.7 billion to Canada’s GDP in 2013 and employed more than 392,000 Canadians.
Canada exported $20.3 billion worth of metals and mineral products to the EU on an average annual basis between 2011 and 2013, led by precious gems and metals. Key exports include gold, nickel, diamonds, aluminum, and iron ore.
Upon entry into force, the Canada–EU Trade Agreement will eliminate existing EU tariffs on metals and mineral products. Eliminated tariffs include iron, steel and aluminum, and the products that are made from them (as high as 7 per cent). The Agreement will also establish a dialogue with the EU on raw materials that will support our market access gains by seeking to prevent unintentional or unnecessary interference with trade.
Mineral production or processing takes place in every region of Canada. The Agreement will secure a competitive edge for the industry that will benefit both urban and rural workers from coast to coast, including those in many Aboriginal communities and in Yukon, Northwest Territories and Nunavut.
Fish and seafood products
Canada has one of the world’s most valuable commercial fishing industries, which contributed approximately $2.2 billion to Canada’s GDP in 2013 and provided some 38,300 jobs to Canadians. Canada’s fish and seafood exports to the EU were worth an average of $390 million per year between 2011 and 2013. These exports face average EU tariffs of 11 per cent, with peaks of 25 per cent.
The EU is the largest importer of fish and seafood products in the world.
Upon entry into force, almost 96 per cent of EU tariff lines for fish and seafood products will be duty–free. A full 100 per cent of these tariff lines will be duty–free seven years later, making these world class products more competitive and creating the conditions for increased sales. For example, the Canada–EU Trade Agreement will eliminate tariffs on cooked and peeled shrimp (20 per cent), live lobster (8 per cent), frozen lobster (6 per cent – 16 per cent) and frozen scallops (8 per cent). Beyond tariff elimination, the Agreement will also establish a framework for dialogue with the EU on trade–related sustainable development issues of common interest, including on such matters as the sustainable management of fisheries and aquaculture.
The Agreement will hugely benefit the fish and seafood sector in Canada, especially in British Columbia, Manitoba, Nunavut, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador.
Information and communications technology (ICT)
Canada’s ICT industry includes leaders in every sector, including from the manufacturing of telecommunications equipment, software development and services, digital media, web, and microelectronics. The sector, which consists mainly of small companies, contributed $7.1 billion to Canada’s GDP in 2013 and employed roughly 70,700 Canadians.
Canadian exports of ICT products to the EU were worth an average of $1.6 billion annually between 2011 and 2013. These exports faced an average tariff of 1 per cent, with tariffs rising to as high as 14 per cent on certain products.
Upon entry into force, the Canada–EU Trade Agreement will immediately eliminate all existing EU tariffs on ICT products, including parts for visual signalling equipment (from 2.2 per cent) and optical fibre cables (from 2.9 per cent). In addition to tariff removal, the new access secured by the Agreement in the EU government procurement market will ensure that Canadian ICT companies can bid on and compete for contracts to supply either ICT products or software services, including consulting services, design, programming and maintenance services.
With its diversified software, wireless and digital–media clusters found in almost every region of the country – from British Columbia to Newfoundland and Labrador – the ICT industry, its innovative companies and knowledge workers across Canada will benefit from the new market access secured under the Agreement.
Services
Service industries are vital to the Canadian economy. Canada is one of the largest services exporters in the world and has significant expertise in a wide range of fields. These include management services; computer and information services; architectural, engineering and other technical services; research and development services; and private education services. Service industries employed over 13.8 million Canadians and accounted for 70 per cent of Canada’s total GDP in 2013, making it the largest sector in Canada.
The EU’s services import market totalled $699.4 billion in 2013. Canada’s services exports to the EU were worth an average of $14.4 billion annually between 2011 and 2013, led by management services, research and development services, architectural, engineering and other technical services.
Citizenship or residency requirements, barriers to temporary entry, and ownership and investment restrictions can all act as barriers to exports of services. These barriers will be reduced or eliminated under the Canada–EU Trade Agreement, directly benefiting businesses and workers across Canada.
Upon coming into force, the Agreement will establish preferential access to and greater transparency in the EU services market, resulting in better, more secure and predictable market access in areas of interest to Canada, such as information and communication technologies services; professional services (e.g., auditing, architectural and integrated engineering services); environmental services; related scientific and technical consulting services; and services incidental to energy distribution.
All of Canada’s provinces and territories will benefit from a reduction in services barriers.
Investment
Known direct investment by Canadian companies in the EU totalled $187.3 billion at the end of 2013, representing 24.0 per cent of Canadian direct investment abroad. The same year, known direct investment by European companies in Canada totalled $191.4 billion, representing 27.9 per cent of total foreign investment in Canada. The Agreement’s investment chapter will provide Canadian and EU investors with greater certainty, stability, transparency and protection for their investments, while preserving full rights for governments to legislate and regulate in the public interest. This would lead to greater two–way investment, which would help create jobs and long–term prosperity for hardworking Canadians.
Key sectors of interest to Canadian investors that will benefit include energy, mining, manufacturing, financial services, automotive, aerospace, transportation, renewable energy, and business and professional services.
Government procurement
Workers in Canada employed in fields such as engineering, architecture and technology will benefit from greater access to the EU’s procurement market, the largest in the world, which is worth an estimated $3.3 trillion annually. The Agreement will give Canadian suppliers of goods and services secure access to EU procurement processes on a preferential basis, providing them with significant new export opportunities. Greater access to the world’s largest procurement market would benefit workers and their families in sectors that are vital to Canada’s economy.
The Canada–EU Trade Agreement will also preserve governments’ flexibility to give preferences to Canadian companies through grants, loans and fiscal incentives. Like all other procurement rules found in Canada’s trade agreements, the Agreement will continue to allow governments to determine which selection criteria help them best meet their procurement needs – like quality, price, experience or environmental sustainability. Also, as in all of Canada’s free trade agreements, important sectors, such as education and health–care services, will be excluded from the Agreement.
The Agreement will expand and secure opportunities for Canadian firms to supply their goods and services to the three main EU level institutions (the EU Commission, Parliament, and Council), the 28–EU member states and thousands of regional and local government entities within the EU, as well as with entities operating in the utilities sector.
