Economics 9708/23 — October/November 2015

EU agreement ‘biggest deal Canada has ever made’

Canada and the European Union (EU) signed the Comprehensive Economic and Trade Agreement (CETA), a free trade deal that will eliminate 98% of all tariffs, and many barriers on trade, investment and labour mobility. Canadian manufacturers, investors and service providers will have access to the 500 million people in the EU, where the total value of production approaches 17 trillion Canadian dollars (C$17 trillion) a year. A study estimates that the duty-free access of Canada’s seafood, timber, manufacturing, agriculture and mineral industries to the EU will generate around C$12 billion in the Canadian economy and create about 80 000 new Canadian jobs.

Tariffs on imports from Europe of clothing, cheese, wine, dairy products and many other items would be removed. However, CETA could take two years to come into effect, as it requires the agreement of all EU members and the approval of Canada’s provinces.

Canadian dairy farmers are against the agreement. They remain in favour of protection from foreign cheese producers and claim that European cheese will be dumped in the Canadian market. Canadian cheese producers argue that the industry is able to produce high-quality products for Canadian consumers but now this growing industry will face direct competition from cheaper, subsidised European cheese producers. Canadian cheese producers could indeed face difficulties, but the Government would provide compensation to address the negative effects of the agreement on the Canadian dairy industry.

But others are optimistic about the agreement, as it will allow Canadian beef and grain to gain new access to European markets. The vice-president of the Canadian Cattlemen’s Association is also hopeful about the new agreement and believes that Canadian beef will be in ‘strong demand’ in the EU. Canadian producers will be able to sell an additional 50 000 tonnes of beef.

CETA’s website claims that under the agreement ‘Canada will now be one of the few developed countries in the world to have a guaranteed preferential access to more than 800 million consumers in the world’s two largest economies, the EU and the United States’.

Source: CTV News 2013, with files adapted from The Canadian Press

Table 1: Canada’s current account of the balance of payments 2008–2012, C$millions

Table 2: Canada’s trade in goods: principal trading areas – seasonally adjusted, current C$millions