By Kelsey Johnson and BJ Siekierski. How the signed-in-principle trade pact affects drug costs, the auto biz, cheese, and more.
The EU and Canada’s trade deal is a moveable feast. Find out who gets what.
Though it’s not entirely finished yet, and isn’t likely to be brought into force for two years, the most contentious issues are settled.
Originally published on theTyee.ca, Oct 18, 2013
After over four years of negotiations and plenty of missed deadlines, the Harper government announced the completion of a Comprehensive Economic Trade Agreement (CETA) in principle with the European Union on Friday.
In Brussels European Commission President José Manuel Barroso and Prime Minister Stephen Harper stood before the cameras.
“This is a big deal,” Harper said. “This is a historic win for Canada.”
“This agreement will help create good well paying jobs. On our side of the Atlantic all provinces stand to benefit,” he added, anticipating objections from some provinces, such as Ontario, which has already warned it will seek compensation for some sectors.
Both Harper and Barroso emphasized that while both sides negotiated hard for their interests, the deal represents a win-win.
While the government touting big market access gains for Canadian agriculture and manufacturing, there were — of course — significant concessions made as well.
On the one hand, 98 per cent of Canadian goods will be getting duty-free access; on the other, the federal government may end up compensating dairy farmers for lost market share and the provinces for higher drug costs.
Below is a first look at some of the more significant changes:
Pharmaceutical intellectual property
“With respect to the pharmaceutical sector, CETA will provide extended protection for innovators while ensuring that Canadians continue to have access to the affordable drugs they need,” a government document explains.
In a nutshell, the Europeans got most of what they asked for.
Though data protection won’t be extended from eight to 10 years, there will be a mechanism in place to compensate brand-name pharmaceutical companies for time lost during the regulatory approval process.
That will mean up to two extra years of protection for brand-name drugs.
To compensate Canadian generic pharmaceutical producers, however, this won’t apply to their exports — and exports are said to represent 40 per cent of their production.
Canada also accepted the European demand for a “Right of Appeal” — something which, at this stage, both the brand-name and generic pharmaceutical producers are cautiously supporting.
Under Canada’s current unique system of dual litigation, a brand-name pharmaceutical company has two mechanisms to stop a generic drug from coming to market.
They use what are commonly called linkage regulations to block Health Canada from authorizing a generic drug until after a patent has expired, and sue for patent infringement — as is normal practice internationally.
According to the Canadian Generic Pharmaceutical Association (CGPA), this amounts to making Canada the only country that allows brand-name pharmaceutical companies to sue generic pharmaceutical companies multiple times on the same patent.
But the government has reportedly assured the CGPA that — while providing patent holders with the “Right to Appeal” invalidated patents — the agreement will also limit litigation to one forum.
“If implemented correctly, the reforms to end dual litigation will help protect Canadian consumers by ensuring invalid or non-infringed patents do not prevent cost-saving competition from coming to market,” the CGPA’s release said.
It took a while to sort out the Rules of Origin (the percentage of an automobile required to be made of Canadian parts), but both sides agreed to eliminate tariffs completely over the next seven years.
There’s a catch, though.
Canadians auto exports will need to have 50 per cent Canadian content, which will move to 55 per cent after seven years.
Given the integration of North American automobile manufacturing, that rules out a lot of the new “open access.”
The Canadian side, however, negotiated a derogation allowing the export of up to 100,000 cars to the EU with much lower Canadian content requirements — as low as 20 per cent.
Canada currently exports eight to 10,000 cars to the EU annually.
Considered to be one of the major stumbling blocks of the negotiation, the agreement in principal contains a number of provisions that will directly impact Canadian farmers, including increased quota access for Canadian beef, pork and bison farmers.
In return, European cheese has been given a larger piece of the Canadian market. Meanwhile, Canadian dairy farmers now have complete, open access to the European dairy market.
There are also a series of working groups that will look at issues involving Phytosanitary and Sanitary rules (including the use of hormones, antibiotics etc.) and the low-level presence of genetically modified products in agricultural exports.
Under the agreement in principle, Canadian beef producers will be eligible for 50,000 tonnes of new quota access into the European Union. Earlier reports had said the Europeans were unwilling to give anything more than 40,000 tonnes worth of access.
Beef exported under this quota will be expected to meet current European conditions on beef, which include strict phytosanitary requirements (i.e. hormone-free).
However, as part of the agreement, Canada and the European Union have said they will form a new Sanitary and Phytosanitary Measures Joint Management Committee to mitigate and prevent these issues from impacting trade — issues like the use of hormones, antibiotics in the production cycle.
Canadian pork farmers will now have access to 80,000 tonnes of pork (which include the 6,000 tonnes of Canadian pork already allowed into the EU market.) Again, like beef these exports will be expected to meet current European import rules for frozen or fresh meat.
Before Friday’s agreement, European cheese producers could export approximately 13,608 tonnes of cheese into Canada. Now, EU producers will be able to ship an additional 16,000 tonnes of fine cheese and an additional 1,700 tonnes of industrial cheese (used more in processed and frozen foods).
In return, the EU has opened up their market entirely to Canadian dairy products (yoghurt, cheese, milk etc.). It remains to be seen whether Canadian dairy farmers, who are strictly controlled under supply management, will be able to take advantage of this new market access.
With Canadian dairy groups already saying this deal could impact their bottom lines, the federal government has said there will be compensation made available. It is unclear, though, whether farmers are the only people who will be able to access it.
Some small-scale cheese producers and factories in Quebec and Ontario have already said they’re worried the deal, which would see them compete with heavily subsidized European cheese makers, could put them out of business.
The deal is also promising greater market access for Canadian seafood products. The EU will eliminate 96 per cent of tariffs on fish and seafood as soon as it’s brought into force. Within seven years, those products will be 100 per cent duty free, in particular key products such as cod, and cooked and peeled shrimp.
Canadian fishermen and processors will also be able to market their products directly on grocery store shelves, something that wasn’t possible before.
In return, though, Canada has agreed to eliminate the need for minimum processing requirements for fish and seafood products being exported from Canada. The provinces will have three years to adjust to the new rules.
Changes to minimum processing was something Newfoundland and Labrador Premier Kathy Dunderdale had previously said the province wasn’t willing to give up. It appears she may have little choice.
Investment and financial services
Though the agreement will contain investor-state dispute settlement — much like the template in NAFTA’s Chapter 11 — financial services disputes will be dealt with separately.
“Disputes will be addressed using CETA’s special dispute settlement rules for financial services,” a government document says.
The Investment Canada Act’s threshold for net benefit reviews of European investments will also be raised to $1.5 billion.
While there are exceptions for cultural industries, aboriginal businesses, defence, R&D, financial services, education and health care, high-value procurement contracts from $205,000 to $7.8 billion will be open to European bidders at the federal, provincial, and municipal levels.
What happens now?
Having agreed on all the big issues, there are still technical ones to be resolved before the negotiating text is finalized. Once that’s done, the text goes to the lawyers for what’s known as a legal scrubbing.
After it’s vetted, the translation process begins. On the Canadian side that’s simple: from English — the language in which the agreement was negotiated — to French. For the Europeans, it’ll mean translating the agreement from English into over 20 languages.
Then it’s on to the ratification process. In Europe it’ll require the approval of the European Council, European Parliament, and — in all likelihood — the legislatures of all EU members. The Canadian ratification process, in comparison, will be a lot simpler.
All in all, it’s expected to take roughly two years for the agreement to be brought into force. In other words, despite the prime minister’s insistence Friday to the contrary, it might not be in effect by the time Canadians go to the polls again in 2015.
Kelsey Johnson and BJ Siekierski report for ipolitics