Background and state of play

EU-Canada negotiations for a Comprehensive Economic and Trade Agreement (CETA) started in May 2009 and were concluded at the EU-Canada Summit on 26 September 2014. CETA is currently applied on a provisional basis with ratification process still ongoing at the EU Member State level. Canada has already completed its ratification process.

CETA’s aim is to increase trade in goods, services and investment between the EU and Canada. Statistics from the first year of provisional application of CETA (October 2017 to June 2018) suggest that EU exports to Canada are up by over 7% year on year.

Content of the agreement

CETA is the EU’s first comprehensive economic agreement with a highly industrialised Western economy and is one of the most ambitious EU trade agreements. CETA removes 98 % of duties on goods, except for a few sensitive agricultural products. CETA also regulates trade in services and investment. CETA’s thirty chapters cover numerous other issues, such as rules of origin, customs and trade facilitation, subsidies, intellectual property rights, regulatory cooperation, sustainable development, competition policy and public procurement.

In October 2017, the EU called for a review of CETA’s sustainable development provisions. In September 2018, the CETA Joint Committee affirmed both parties' commitment to effectively implement the Paris Agreement. Some commentators have claimed that CETA does not effectively protect public services. The Commission, in contrast, holds that CETA does not oblige Member States to liberalise public services and also allows them to reverse earlier steps in liberalisation.

CETA also seeks to alleviate concerns associated with investor-state dispute settlement (ISDS) mechanisms through the introduction of a new investment court system (ICS). However, critics have then questioned whether the new ICS would be compatible with EU law and are concerned about a sharp rise in investor claims.

Status of the procedure to adopt the agreement

After tough negotiations, involving in particular the Belgian Walloon region, the Council adopted a decision to sign CETA on 28 October 2016. As part of the agreement reached, the EU and Canada decided to issue a joint interpretative instrument to take away various concerns raised by the Walloon region. In addition, Belgium requested an EU Court of Justice (CJEU) opinion on the compatibility of the new ICS with EU law on 6 September 2017. The non-binding opinion of the Advocate-General was delivered in January 2019 and the provisions were judged compatible with EU law. This was confirmed by the final opinion of the CJEU on 30 April 2019 concluding that the investment provisions of CETA is compatible with EU primary law.

The European Parliament gave its consent to CETA on 15 February 2017. Pending Member States’ ratification, mixed agreements are applied provisionally. In CETA's case, the Council adopted a decision on provisional application on 28 October 2016. This took effect on 21 September 2017 and applies to the majority of CETA provisions, except for a few related mainly to investment.

Overall, CETA will have to overcome several hurdles before its formal conclusion. As the Commission decided in July 2016 to present CETA to the Council as a 'mixed agreement', the Council can only conclude the agreement after it has been ratified by the individual Member States. This involves the approval of all national parliaments and some regional parliaments. As of October 2019, 13 Member States had notified the European Council of completion of national ratification procedures for CETA. These Member States are Austria, Croatia, Czechia, Denmark, Estonia, Finland, Latvia, Lithuania, Malta, Portugal, Spain, Sweden, and the United Kingdom.  
 

Position of the European Parliament

The European Parliament approved CETA on 15 February 2017 by 408 votes to 254, with 33 abstentions. Earlier, on 24 February 2017, the Committee on International Trade (INTA) had also voted in favour of CETA by 25 votes to 15, with 1 abstention. 

The European Parliament adopted a resolution in 2011 on EU-Canada trade relations in which it set out its position on key chapters of the CETA negotiations, including investment disputes, the right to regulate, regulatory differences and agriculture. The Parliament in particular wanted any potential ISDS mechanism not to inhibit future legislation in sensitive policy areas. In 2015, the Parliament went a step further and asked for the replacement of ISDS with a new system, which ultimately became the new ICS (provisions reaffirming the right to regulate were also included). Lastly, in its 2011 resolution, the Parliament wanted sensitive sectors to be excluded from the scope of CETA’s investment chapters, which has also been followed up on by the negotiators.

References                        

• EP Legislative Observatory, EU/Canada Comprehensive Economic and Trade Agreement (CETA), 2016/0205(NLE)
• European Parliament, Resolution of 8 June 2011 on EU-Canada trade relations
• European Parliament, CETA: MEPs back EU-Canada trade agreement, 15 February 2017
• European Commission, Answer given by Ms Malmström on behalf of the Commission in response to a Parliamentary question, 26 January 2017
• European Commission, One year on EU-Canada trade agreement delivers positive results, Press Release, 20 September 2018
• Council, Joint Interpretative Instrument on the CETA between Canada and the EU and its Member States, 13541/16

Further reading

• European Parliament, EPRS, CETA implementation - SMEs and regions in focus, In-depth analysis, November 2019
• European Parliament, EPRS, From arbitration to the investment court system (ICS): The evolution of CETA rules, In-depth Analysis, June 2017
• European Parliament, EPRS, CETA ratification process: Latest Developments, At-a-Glance, October 2017
• European Parliament, EPRS, Canada: Economic indicators and trade with EU, 23 October 2018

Author: Issam Hallak, Members' Research Service, legislative-train@europarl.europa.eu

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