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Free trade agreement iwd 11. October 2016

CETA on the finishing straight

The free trade agreement CETA might be signed at the end of October at the EU-Canada summit in Brussels. The chances are good, since the EU trade ministers have already indicated the necessary support for the deal, which is to regulate future trade of goods and services between the EU and Canada. Economy minister, Sigmar Gabriel (SPD), has already managed to allay the misgivings of his party regarding CETA.

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With CETA (the Comprehensive Economic and Trade Agreement), the EU and Canada are making history. After all, this has become a free trade agreement that sets new standards: it dismantles trade barriers, opens markets, and secures prosperity and jobs – and all this to an extent never achieved before by a free trade agreement.

If CETA were to come into force, more than 99 per cent of tariffs between the EU member states and Canada would be dropped.

For Germany, this is good news: in 2015, Germany exported goods worth almost 10 billion euros to Canada, with imports from Canada totalling 4 billion euros (graphic). Canadians buy chiefly cars and machines from Germany, whereas raw materials such as iron and copper ores as well as oilseed account for more than a fifth of German imports from Canada (graphic).

Not only the manufacturers of industrial products will profit from the removal of tariffs: There will also be advantages for the agriculture industry, if, for example, dairy products from the EU can be exported duty-free to Canada in the future.

The elimination of tariffs agreed in CETA could lead to savings for European companies of approximately 470 million euros per year.

The EU Commission succeeded also in achieving another significant development, namely in the area of public procurement. Germany has long been open to foreign suppliers – these can participate in the public procurement market under the same conditions as German companies. When CETA comes into force, the same treatment will be reached for the first time for European enterprises in Canadian provinces and districts .

In contrast to the fears of many, CETA is not an agenda for deregulation. Right from the beginning in the preamble to the agreement, the right to regulation is guaranteed to the governments. In addition, both contractual parties explicitly commit themselves to sustainable development and labour protection. In detail, this means:

  • The regulations of the German labour market will not be challenged. A labour market clause ensures that the existing legal provisions of all contractual parties for labour and social protection will remain valid, including regulations on minimum wages and collective wage bargaining. This is also in the interests of Canada, where the standards in the areas of labour protection are also very high: Canada already introduced a minimum wage law 100 years ago, for example.
  • The principle of public utilities also remains unaffected by the coming into effect of CETA, since the contractual parties have exempted public utilities, such as water and power provision or the school system, from any obligations of liberalisation. Even remunicipalisation – i.e. the return to public law in the organisational form after privatisation – remains possible, if the local authorities see this as necessary.The local authority associations in Germany, i.e. the organisation of those directly affected by the public utilities clause, already confirmed in September that public utilities would not be threatened by CETA.
  • Cultural diversity will also not be affected by CETA. The contractual parties have expressly committed themselves to the UNESCO convention for the protection and promotion of cultural diversity.
  • The European precautionary principle remains guaranteed. Even after CETA takes into force, products will be allowed onto the European market only when they are proven to be safe. In addition, trade-limiting measures which protect human life, health, animals and plants will still be possible.
  • CETA creates a modern investment protection system. There will be no private judges making decisions on compensation payments to the benefit of Canadian investors in non-transparent processes with no possibility for revision. Rather there will be a publicly legitimised investment court of justice. This will be led by judges, who will be nominated by both contractual parties. There will also be a court of appeal. All processes will be transparent, all hearings will be public.

Decisive is, however, the provision that governments can, in accordance with CETA, continue to enact regulations and laws without having to fear being sued by investors for discrimination or expropriation. This right of regulation is affirmed in its own paragraph in CETA.

How does the map for CETA look? The formal EU decision in the Council of Ministers is expected on 18 October. The trade agreement would then be signed on 27 October at the EU-Canada summit in Brussels. Thereafter would come the ratification process. Since CETA affects the competencies of the member states, all EU countries would have to approve the agreement in order for it to come into force.

Nevertheless, parts of the CETA agreement could take effect before this – i.e. as soon as the EU Parliament agrees on provisional application. However, this will only affect such areas of regulation that are without doubt in the powers of the European Union in the view of the EU Council, such as the agreements on the elimination of tariffs. Contractual components which affect the competencies of the EU member states can only come into force after ratification by all member countries.

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