Belgian Days In Toronto May 11 2016

CETA – Economic & Business Outlook for the Canada & EU Free Trade Agreement

In his opening remarks, Pieter de Crem, Belgium’s Federal State Secretary for Foreign Trade announced that Canada stood 28th among his country’s export markets with chemicals and transportation equipment leading the way. In the other direction, Canada ranks 22nd as a source of Belgian imports with chemicals and gemstones topping the list.

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His Excellency also noted that Belgium serves as a gateway to Europe with its superb transportation and logistics facilities in Antwerp, Bruges, Ghent and Brussels. As well, it  offers a highly skilled, multilingual work force. In addition, Canadian firms such as McCain Foods uses it as a test market for its food products before introducing them to other European Union consumers.

He also cited the soon-to-be signed Comprehensive Economic & Trade Agreement  (CETA) between Canada and the 28-member EU is of utmost importance to small-and medium-sized companies in both countries. He also believes that CETA will serve as model for all future free trade agreements.

Michael Chan, Ontario Minister of Citizenship, Immigration & International Trade pointed out that Belgium is the 7th largest market for Ontario exports accounting for $1.8 billion in two-way trade in 2015. He also stressed the potential value of CETA as a way to diversify provincial markets beyond the US as well as creating as many as 30,000 new jobs.

The head of mission of the European Union in Canada, Ambassador Marie-Anne Coninsx outlined  CETA’s impact on the entire European Union and its 500 million consumers, which is a larger market than that of the US.

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She explained that CETA represents the new generation of free trade agreements since it goes beyond simply reducing tariffs on products. It opens up free trade in services, which now make up 75 per cent of many national economies as well as reducing non-tariff barriers such as intellectual property protection. More important , it will also open markets for public-sector procurement that will include the provinces for the first time. In addition, it will facilitate foreign investment as a result of  agreements on investor-protection provisions.

From her perspective as Vice-President and Deputy Chief Economist of the Royal Bank of Canada,  Dawn Desjardins sees 2016 as a year of economic transition. She pointed out  the slowdown in commodity prices, especially oil and gas.  As result, corporate investment in these sectors is slowing down without others picking up the slack.  Other uncertainties include the slowdown in the Chinese economy and the scheduling  of US Federal Reserve Bank interest rate decisions.

Members of the panel discussion chaired by Paul Lalonde,  a partner with the law firm Dentons delved more deeply into the CETA’s potential impact on the Canadian economy.

Warren Everson, Canadian Chamber of Commerce Vice-President foresees potential growth of trade of 15 to 20 per cent after CETA is ratified.  In the Q & A session, he stated that the upcoming United Kingdom referendum on remaining in the EU  — the so-called Brexit vote  — was worrisome since almost two-thirds of Canada’s EU trade passes through the UK.   If UK voters decide to leave the EU, Canadian exporters would face various challenges related to possible changes to rules of origins of their exports if they continue to use existing routes.

Victor Severino, Ontario’s  Chief CETA Negotiator indicated that Canada would benefit from first-mover advantages even after CETA ratification since it would also enjoy any improved terms resulting from the proposed US-EU Transatlantic Trade and Investment Partnership (TTIP) negotiations. In the Q&A session,  he noted that the contract thresholds of public procurement deals involving provinces would be too high to involve municipalities directly. But many of their infrastructure projects would likely become cheaper and of higher quality.

David Bohan, Director of Supply Chain Solutions, Port of Halifax underscored the crucial role that the Port of Halifax plays as the closest sea link to the Belgian port cities of Antwerp and Bruges. With weekly service to both, goods can make the trip in either direction within seven to 10 days. Besides offering  16 m.-deep draft moorings capable of handling the largest containers ships now in use, the Port of Halifax also offers a number  of newly installed container-handling  facilities and equipment. Post-CETA, Bohan expects that cargo traffic will increase by as many as 100,000 containers per year.

Paul Van Coillie, co-founder of the Belgian firm Arco Information talked briefly about how his software platform can take back-end administrative data, analyze it before delivering  it to front-end operations staff enabling them to make better business decisions and improve customer service. During his visit, he signed up a Canadian partner.

In his wrap-up comments, Daniel Schwanen, C.D. Howe Institute  Vice-President of Research echoed Ambassador Coninsx’s earlier description of CETA as a new-generation FTA. He concluded that CETA goes beyond previous agreements by seeking to foster greater cooperation and collaboration among trading partners to boost competitiveness and productivity. He noted that for the services sector, the agreement would introduce the negative-list approach, i.e. if an item is not listed, it will be permitted now and in the future. In this way, products and services yet to be discovered will be acceptable. Under the former positive-listing system, only those items specifically cited would be acceptable, essentially freezing out all future innovations.

However, Schwanen pointed out a few unresolved trade issues including Canada’s dairy products supply management system and other concerns related to pharmaceutical licensing and pricing.

All told, he believes that CETA  will be hugely positive for Canada. He says, “History has shown us that the gains from such agreements tend to be a pleasant surprise even 10 to 20 years after they take effect. Just look at NAFTA.”