Prime Minister Stephen Harper announced that Canada and the European Union (EU) have reached an agreement in principle on a comprehensive trade agreement that is expected to boost trade and investment ties between the two partners, and is expected to create jobs and opportunities for Canadians. In the process of doing so, Canada’s trade deficit with the EU, presently $12 billion annually, is expected to narrow. The agreement is officially known as the Canada-EU Comprehensive Economic and Trade Agreement (CETA).

This is the most ambitious trade agreement that Canada has ever reached. It covers most aspects of the Canada-EU bilateral economic relationship, including trade in goods and services, investment, and government procurement. It also grants the flexibility to include areas of mutual interest beyond those that have traditionally been included in Canada’s trade agreements, such as regulatory cooperation. “This trade agreement is an historic win for Canada,” said Prime Minister Harper. “It represents thousands of new jobs for Canadians, and a half-billion new customers for Canadian businesses.”

The Agreement will provide Canada with preferential market access to the European Union’s more than 500 million consumers in 28 countries currently generating $17 trillion in annual economic activity. Approximately 98 per cent of all mutual tariffs will be eliminated when the Agreement comes into force.

The government expects that, once implemented, the Agreement will create additional GDP gains of $12 billion annually, and 80,000 additional jobs. Europe expects annual GDP gains of $16.3 billion. Both parties expect bilateral trade to increase by about 20 per cent. Europe expects that 50 per cent of its expected gains will be derived from the elimination of tariffs and existing non-tariff barriers. Non-tariff barriers represent the creative obstacles that corporations and governments deploy to prevent unwanted bidders from being eligible to bid on contracts.

Without the details of the Agreement having been made public, it is expected that major Canadian beneficiaries will be beef and pork producers, the financial services industry, automobile manufacturers, participants in aquaculture and agriculture, producers of chemicals and plastics, as well as manufacturers of aerospace, railway products, and heavy machinery. Provincial and municipal procurement projects on both sides will be opened up to competition. Losers will include Canadian producers of specialty cheeses, and it also appears that as a result of tightened drug patent protection, it will take longer for generic drugs to be made available, thus likely raising the cost of drugs for individuals, insurance companies and provincial drug plans.

Joy Nott, President of I.E. Canada commented “We are very excited to hear that negotiations have been concluded and that a deal has been reached. We are looking forward to the full implementation of CETA and will continue to work with our members as they take advantage of the benefits of this agreement.” Representing Canada’s largest importers and exporters who employ over 1.6 million working Canadians, I.E.Canada strongly believes that the liberalization of trade will significantly benefit the Canadian economy. “CETA will provide new export markets for Canadian businesses, offer competitive advantages to Canadian companies, enhance the choices available to consumers and increase employment opportunities for Canadians both in Canada and abroad.”

The Agreement will have an immediate positive impact on exporters of aquaculture products, as well as beef and pork producers and grain producers, whose exports to Europe are expected to increase by some $1.5 billion. However, it is questionable whether Europeans will increase their purchases of made-in-Canada automobiles, even though quota numbers have increased dramatically. The Agreement will involve measurable costs as well, notably the loss of about $700 million annually in duties not collected, as well as compensation to be paid to provinces that will demand compensation for increased costs resulting from the Agreement, and lost business of their resident corporations.

From an overall perspective, the Agreement clearly embodies opportunities. Even though the gains expected by this government may ultimately fall far short of expectations, the real gain may be that this Agreement paves the way for Canadian enterprises to become more productive, and thus better capable of competing with firms in the EU, as well as elsewhere. The Agreement will also force many government departments to examine their roles in facilitating or obstructing business, the result of which can only be beneficial to increasing Canadian competitiveness.

Now that an agreement in principle has been reached, both parties will seek to conclude the formal agreement and undertake a legal review of the document. Once the final agreement is signed, it will need to be ratified by respective parliaments, which is a process that will take two years. Is it a coincidence that ratification of the Agreement is likely to take place during the final weeks of the 2015 federal election campaign?