Is CETA under threat?

CETA, Canada’s Comprehensive Economic and Trade Agreement with the European Union, provisionally in effect since September 2017 and functioning well, may be under threat due to a surprising rejection by the French Senate.

On March 21, France’s upper chamber rejected the French government’s bill to approve CETA by 211 votes against versus 44 in favour. The agreement had already been narrowly accepted by France’s lower chamber in July 2019, and a vote in the upper chamber had been delayed until now.

Negotiations for this FTA began in Prague, Czech Republic, in May 2009 and were concluded in October 2016 in Brussels, followed by the assent of the European Parliament in February 2017. On the Canadian side, Parliament’s Bill C-30, implementing CETA, received Royal Assent in May 2017, leading to its provisional implementation in September 2017.

Full implementation requires ratification by all 27 EU countries because CETA is a “mixed agreement,” containing new types of provisions on investment falling under the shared competence of both the EU and its member states. The investment provisions refer to an investor protection mechanism, market access for portfolio investment and an investment court system; they are narrow and highly technical.

The other “classic” provisions on trade in goods, services, government procurement and mobility of professionals do not require individual member states’ approval and have been in full force for importers and exporters on both sides of the Atlantic since 2017.

Seven years later, only 17 out of the 27 EU countries’ individual parliaments have ratified it, and the other 10 have dragged down the process, perhaps for fear of rejection by their legislators. In Cyprus, for example, Parliament rejected CETA in 2020. In Italy, the government opposes CETA on principle, even though the agreement has been beneficial to Italian agriculture and food exporters.

The French rejection defies common sense, especially given bilateral trade in goods increased by 51 per cent between 2017 and 2023. Farmers’ protests in France earlier this year have polarized public opinion and politicians against FTAs, and the negative vote is mostly a result of that, as well as political maneuvers ahead of European Parliament elections in June.

The predicted “flood” of Canadian products in Europe has not materialized. In fact, the opposite has happened. In 2023, Canada exported 1.4 million tonnes of beef to Europe, barely two per cent of the CETA-allocated volume. For France, the figures are insignificant: 29 tonnes of Canadian beef were imported in 2023. Conversely, European livestock producers increased their beef exports to Canada from two to 14 million tonnes in seven years. Similarly, European cheese producers, many of whom are French, have fully utilized their export quota of 19 million tonnes.

Europeans have become skeptical about FTAs, influenced in part by environmentalists and anti-globalization movements. Disinformation on social media has fed populism, with both far-right and far-left political parties pushing for nationalist agendas, not unlike in other parts of the world.

Several years ago, the EU pursued an FTA with the United States, but negotiations were abandoned as Europeans grew afraid of cheaper U.S. agricultural products. Something similar happened with the EU-FTA with Mercosur countries (Argentina, Brazil, Paraguay and Uruguay), signed several years ago but not implemented so far due to concern over Brazilian meat and agricultural products.

In the past, when free trade agreements were negotiated and implemented, we lived in a different world. We are now living in the era of populism and post-truth, a world where false information can be disseminated with impunity and can greatly influence public perception as a result. Previously, politicians who blatantly lied to the public were shamed; today, politicians who lie through their teeth gain popularity. It has therefore become more difficult to “sell” reasonable agreements to the public, as demonstrated by the CETA saga.

There is no danger of Canadian products invading Europe – we are a modest player. Canada is not the U.S. or Brazil. CETA is a great tool for Canadian exporters to diversify their export markets and sources of supply away from the U.S., lessening our dependence on our southern neighbours. This is especially important ahead of the U.S. elections in November, where one of the incumbents has a protectionist agenda that would be detrimental to Canada.

As geopolitics increasingly influence world trade (geopolitics have been identified as the primary concern of surveyed businesses worldwide in the Allianz Global Survey 2024), it is essential that like-minded countries like Canada and the European Union continue to work closely, promoting the rule of law, fundamental freedoms, equality, democracy and fair trade. At a time when international organizations like the United Nations are dominated by despotic countries, it is vital for democracies to work closely together and preserve their special relationship.

As to CETA, let us hope that common sense will prevail in Europe and that the countries that have not yet ratified it will promptly come to their senses. In the meantime, as far as the trade in goods and services is concerned, CETA is in full force and Canadian companies should consider Europe a primary target market.