Regional trade agreements (“RTAs”) facilitate trade between their signatories. They can be bilateral (between two countries) or plurilateral (between three or more countries), and they encompass all reciprocal trade agreements, including those between countries from different geographic regions. These agreements are often referred to as “Free Trade Agreements” (FTAs).
RTAs have become increasingly complex – and increasingly important – to international trade. They generally set out a range of rights and obligations that provide for non-discriminatory treatment and guaranteed levels of market access for the goods and services traded between the parties. Each RTA is unique, however, and must be analyzed on its own terms. Some RTAs cover the protection and promotion of investments, incorporating the provisions that would otherwise be the subject of separate Bilateral Investment Treaties (“BITs”) or, in Canada’s case, Foreign Investment Promotion and Protection Agreements (“FIPAs”).
Among other things, RTAs may address:
- Tariff elimination;
- Tariff rate quotas (TRQs);
- Rules of origin;
- Customs procedures to facilitate trade;
- Trade remedies and emergency actions;
- Access to government procurement;
- Technical barriers to trade and sanitary and phytosanitary measures;
- Investment protection, including access to “Investor-State Dispute Settlement” (“ISDS”);
- Cross-border trade in services;
- Work force mobility, including the temporary entry and stay of individuals for business purposes;
- Protection of intellectual property (IP);
- Mutual recognition of professional qualifications;
- Access to specific service sectors, such as banking, telecommunications, and international maritime transportation;
- Electronic commerce; and
- Dispute Settlement.
Canada is party to numerous FTAs and is negotiating and conducting exploratory discussions in relation to several more. More information regarding Canada’s FTAs is available online at Global Affairs Canada’s website.
In this context, FTAs are treaties intended to secure better access to foreign markets for businesses by reducing trade barriers. This provides companies with access to more efficient supply chains, reduces their costs of doing business, and creates opportunities for them to expand and grow. The beneficiaries include producers, distributors, services suppliers, and end-use customers.
From Canada’s perspective, the most important of the FTAs are the North American Free Trade Agreement (“NAFTA”) and the Canada-European Union Comprehensive Economic and Trade Agreement (“CETA”). The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) also represents a very important FTA for Canada, and while it is not yet in force, the legislation to implement this agreement is currently being considered in Canada’s Parliament.
BUILDING ON THE FOUNDATION OF THE WORLD TRADE ORGANIZATION (WTO) AGREEMENTS
Canada’s FTAs enhance Canada’s multilateral rights and obligations under the WTO Agreements. In this sense, the WTO Agreements form the foundation upon which the FTAs are built. Important WTO obligations, such as those under the Agreement on Technical Barriers to Trade and the Agreement on Sanitary and Phytosanitary Measures, are incorporated by reference into Canada’s FTAs. To understand Canada’s FTAs, it is necessary to also understand the WTO rights and obligations that form their foundation.
Since the NAFTA came into effect on January 1, 1994, it has been the single most significant FTA for Canada. As a comprehensive FTA between Canada, the United States and Mexico, it has removed trade barriers and increased investment opportunities between the three countries.
Negotiations to update the NAFTA are currently underway.
When it was signed, the CETA became Canada’s most significant FTA since the NAFTA. As its name indicates, it is a comprehensive FTA between Canada, the EU, and the 28 EU Member States. The agreement began to be provisionally applied between Canada and the EU on September 21, 2017, meaning that the majority of its provisions are now in force. The CETA’s provisions include, among other benefits:
- the immediate elimination of most customs duties on EU and Canadian goods to which tariff rates previously applied;
- guaranteed market access and non-discriminatory treatment for EU firms when they participate in public procurement opportunities at the federal, provincial/territorial, and municipal levels of government in Canada (for contracts above the applicable value thresholds), and equivalent rights for Canadian firms in the European Union;
- enhanced intellectual property rights, including new protections for certain geographical indications identifying goods originating in specific regions (e.g., “Feta cheese” from Greece); and
- liberalized rights of mobility and temporary stay for key business personnel and investors, independent professionals, and contractual service suppliers visiting Canada from the European Union and vice versa.
The levels of market access that CETA provides to EU companies, particularly with respect to preferential tariff treatment and sub-central public procurement, are much greater than the levels of access provided under NAFTA.
It is now essential that all EU companies doing or seeking to do business in Canada, and all Canadian companies doing or seeking to do business in the European Union, fully understand the opportunities and benefits that flow from the CETA.
The CPTPP, also sometimes referred to as the “TPP 11”, is a comprehensive FTA that has been concluded between 11 countries — Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam — but is not yet in force. It will enter into force 60 days after the date on which at least six of the signatory countries have completed their domestic implementation procedures and ratified the agreement. To date, the CPTPP has been ratified by Japan, Mexico, and Singapore, and the Government of Canada is well on its way to joining them. The legislation to implement the provisions of the agreement into Canadian law, Bill C-79 (the CPTPP Implementation Act), was introduced in the House of Commons on June 14th, 2018 for passage through Parliament.
When the CPTPP enters into force, it will be the largest FTA in the world. For Canadian businesses, it will provide new and enhanced market access opportunities in the other CPTPP countries, including, most significantly, the Asia-Pacific markets.