Today, September 21, the landmark trade deal between Canada and the European Union (EU), the Comprehensive Economic and Trade Agreement (CETA or the Agreement), comes into provisional effect after almost a decade of negotiations. Provisional application of CETA is a milestone achievement that ushers in a number of significant changes to the Canadian legal and regulatory landscape, including the following:
- New Procurement Regime: Together, CETA and the Canadian Free Trade Agreement (CFTA) – which came into effect on July 1, 2017, to replace the existing Agreement on Internal Trade (AIT) – introduce a new procurement regime in Canada. Federal and provincial Crown corporations and agencies and municipal, academic, school and hospital sector entities, as well as any companies seeking to do business with public entities in Canada or the EU, should familiarize themselves with this new regime.
With respect to covered procurements, CETA requires procuring entities to respect the principles of non-discrimination, transparency and impartiality and to follow a number of specific rules and procedures relating, for instance, to notices of intended procurement, selective tendering and submission dates. For its part, the CFTA contains clarifications and explicit rules and procedures that differ from the AIT, including relating to: tender notices, local preference, electronic posting, supplier experience and prequalification, technical specifications, new information and modifications, negotiations, public-private partnerships, and debriefs.
In terms of dispute resolution, under CETA, suppliers from the EU will gain procurement challenge rights regarding covered procurements. Legislative changes to the Canadian International Trade Tribunal Procurement Inquiry Regulations provide the authority for the Canadian International Trade Tribunal to consider and make findings with respect to federal government procurements that are subject to Chapter 19 of CETA.
With respect to provincial procurements, both CETA and the CFTA envision the creation of a robust procurement complaint system. CETA provides for the establishment of a timely, effective, transparent and non-discriminatory administrative or judicial review procedure through which a supplier may challenge a breach of CETA’s procurement chapter. CETA also obliges each party to adopt procedures that provide for rapid interim measures to preserve the supplier's opportunity to participate in the procurement and for corrective action or compensation for the loss or damages suffered (which may be limited to either the costs for the preparation of the tender or the costs relating to the challenge, or both).
Canadian companies also gain access rights in regard to procurements by EU member states.
- Increased Investment Canada Act Threshold: The Investment Canada Regulations have been amended to provide that investors from the EU that are not state-owned enterprises will benefit from an increased investment review threshold of $1.5 billion in enterprise value. As a result of most-favoured nations clauses in Canada’s other free trade agreements, investors from Chile, Colombia, Honduras, Mexico, Panama, Peru, South Korea, and the United States will also benefit from this increased review threshold.
- Tariff Reduction and Elimination: Provisional application of CETA means elimination of a large number of Canada’s customs duties, either immediately or over the next seven years. Pursuant to CETA, Canada has also established tariff rate quotas (TRQs) to allow the importation of certain quantities of cheese and industrial cheese from the EU into Canada. For its part, the EU has committed to eliminating or reducing existing tariffs, including immediately upon provisional application in respect of a vast array of products such as gas turbines, maple syrup, digital cameras, auto parts, prepared vegetables, power generation and distribution equipment, and pet food. The EU has also established TRQs for sensitive products such as beef and pork.
- New Patent Protections: CETA has prompted changes to Canada’s patent regime, including the establishment of a system of certificates of supplementary protection for pharmaceuticals, which provide an additional period of patent protection.
CETA’s provisional application also means that ground-breaking provisions related to reducing non-tariff and regulatory barriers, streamlining cross-Atlantic trade in services, providing for temporary entry and stay of international personnel for business purposes, recognizing professional qualifications, and protecting European geographical designations are also in effect.
Next steps
CETA will fully enter into force once the national parliaments of all EU member states ratify the Agreement in accordance with their domestic requirements, which could take several years and continues to face many challenges. The sections of CETA that will not come into effect until the Agreement is fully ratified include most of the investment provisions in Chapter 8 and certain provisions of Chapter 13 (Financial Services) insofar as they concern portfolio investment, protection of investment or the resolution of investment disputes between investors and states.
