The modernized Canada-Israel Free Trade Agreement (CIFTA) entered into force today (1st September 2019). Compared to the original text of the CIFTA, which entered into force in 1997, the modernized CIFTA updates the provisions relating to trade in goods (including the rules of origin) and also adds new chapters focusing on trade facilitation, technical barriers to trade, sanitary and phytosanitary measures, electronic commerce, intellectual property, environmental protection, labour rights, gender discrimination, small and medium-sized enterprises, and dispute settlement.

The updated text brings the CIFTA’s substantive provisions into alignment with those in Canada’s other modern trade agreements, such as the Canada-EU Comprehensive Economic and Trade Agreement (CETA) and the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP), further liberalizing trade between Canada and Israel, while advancing Canada’s progressive international agenda on environmental, labour, and gender equality issues.

A number of additions to the CIFTA highlight the increasingly important role that regional free trade agreements may play in regulating international trade between WTO members. For example, where a matter arises under both the CIFTA and the WTO Agreements, a complaining Party has the discretion to initiate the new bilateral dispute settlement process set forth in Chapter 19 of the CIFTA as an alternative to — and to the exclusion of — the WTO dispute settlement process.

Notably, where Canada and Israel each have free trade agreements with a “non-Party” third country, a straightforward and highly liberal cumulation provision allows them to treat the non-Party’s territory as part of the CIFTA free trade area when applying the rules of origin. While Canada and Israel must agree on the “applicable conditions” before this provision is given effect, there is no requirement for their respective free trade agreements with the third country to include equivalent cumulation provisions. This flexibility would allow, for example, Canada and Israel to agree between themselves to treat U.S.-origin goods and materials as “originating” for the purposes of the CIFTA rules of origin, notwithstanding the absence of an equivalent provision in the NAFTA or the CUSMA/USMCA/T-MEC.

Tereposky & DeRose regularly provides advice on regional trade agreements. Should you have any questions regarding this matter, we are at your disposal.