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Joint report: Third CETA Joint Committee meeting

December 2, 2022 (Ottawa)

The third Canada-European Union Comprehensive Economic and Trade Agreement (CETA) Joint Committee meeting was held in Ottawa in hybrid format on December 2, 2022 and was co-chaired by Canada’s Minister of Small Business, Export Promotion and International Trade, the Honourable Mary Ng, and the European Union’s Executive Vice-President and European Commissioner for Trade, the Honourable Valdis Dombrovskis. Also in attendance, were representatives of Canada’s Provinces and Territories, European Union (EU) Member States, and Canadian and EU officials.

The meeting commemorated the five-year anniversary of CETA’s provisional application and celebrated the collaborative initiatives and positive economic benefits resulting from the Agreement. The Co-Chairs recognized CETA as the central pillar of Canada and the EU’s bilateral trade and economic partnership. They noted that our shared values, respect for rules-based trade, commitment to sustainable development, fight against climate change, and preventing biodiversity loss fortifies the importance of the relationship. They also highlighted the importance, in the current geopolitical context, of working closely together to maintain open trade and enhance supply chain resilience, including for key sectors, such as critical raw minerals.

Introductory points

The Co-Chairs acknowledged the importance of CETA and exchanged views on the significance of the strong partnership between Canada and the EU in the context of the ongoing geopolitical challenges and instability. They further noted that initiatives including regulatory cooperation, the Mutual Recognition Agreement (MRA) to honour each other’s Trusted Trader programs, and the CETA Cleantech Summit are delivering results on both sides of the Atlantic for business, workers and communities. They noted that this progress is in addition to important ongoing bilateral cooperation under CETA, which is focused on advancing sustainable inclusive trade, gender equality and climate action.

The Co-Chairs underscored that the Canada-EU partnership is more important than ever in the face of Russia’s illegal invasion of Ukraine. They further noted that CETA provides stability for businesses and opportunities for growth and collaboration, in turn creating jobs and providing tools to address global challenges like pressures on supply chains, food security, and rising energy prices. Minister Ng affirmed Canada’s commitment to support Europe as it seeks solutions to transition towards alternative energy resources and raw materials.

The Co-Chairs committed to further discuss outstanding trade issues and to identify solutions. Both welcomed the German Bundestag’s December 1, 2022 vote in favour of a CETA ratification bill as a positive step toward ratification by Germany, and reiterated their desire to see the remaining EU Member States complete ratification in a timely manner.

The Chief Economists from Canada and the EU provided a presentation on CETA successes and an overview of Canada-EU trade performance over the last 5 years. They highlighted how CETA is helping to fight climate change. Notably, since CETA’s provisional application began, the Agreement is delivering for businesses, workers and consumers. The figures in this respect are impressive, bilateral merchandise trade grew by over 30%. Furthermore, trade in environmental goods increased by more than 20%. The Co-Chairs welcomed CETA’s successes as evidenced by these positive gains in bilateral trade, increased participation of SMEs in trade between Canada and the EU, and the growing utilization of CETA preferential tariff rates that led to significant tariff savings on both sides of the Atlantic.

The Co-Chairs exchanged views on the WTO, reiterating that Canada and EU are valued partners and allies in promoting the rules-based system and stressed the close cooperation in the Ottawa Group on how to take the WTO reform process forward. They took note of the topics on which Canada and the EU are cooperating to achieve concrete progress ahead of the 13th WTO Ministerial Conference. Notable, cooperation exists on the Trade and Health Initiative; reform of the WTO dispute settlement system; fisheries subsidies negotiations; agriculture; the Joint Statement Initiatives on e-commerce and services domestic regulation; proposals to improve regular WTO work, such as notifications and consideration of trade concerns; and ongoing work on improving the application of special deferential treatment, trade and environmental sustainability, trade and gender, and competitive neutrality.

Reporting from the specialized committees

Canada and the EU exchanged views on the reporting from the CETA specialized committees.

Canada’s perspectives on reporting from the specialized committees, including on:

Agricultural issues

Canada noted that it was pleased that the EU’s Draft Implementing Regulation on Veterinary Medicinal Products (VMP) listing of antimicrobials reserved for human use was founded on scientific evidence and is complementary to global efforts on Anti-Microbial Resistance. Canada expressed interest in knowing the EU’s anticipated timelines for the VMP legislation concerning import rules for third countries, and when the complete regulation will be enforced. The EU recognized Canada’s concerns, and committed to keeping Canada informed of the final legislation and to providing an adequate transition period to enable third countries to comply with the requirements.

Canada stated that beef and pork Tariff Rate Quotas (TRQs) were an important outcome of CETA negotiations for Canada and that it remains committed to ensuring that industry can fully access the benefit, including through a mechanism to shift quota allocations automatically on demand when quantities remain available following the initial application period. In response, the EU stressed its view that the EU processing time, although not “immediate”, is still automatic and thus in line with CETA provisions. The EU also highlighted the joint effort undertaken between Canada and the EU to establish a guide for industry on the EU’s meat TRQs, which was designed to encourage a greater uptake of the export opportunities offered by the EU quotas.

On maximum residue levels (MRLs) for plant protection products and import tolerances, Canada noted its view that MRLs are established to ensure food safety. With respect to the EU’s proposed measures to introduce MRLs for two neonicotinoid pesticides, Canada indicated support of the EU’s environmental objectives, and noted that Canada’s scientific research shows that proper usage of these neonicotinoids would align with the objective of maintaining pollinator health. Canada proposed that officials work together to share best practices for risk mitigation and pollinator recovery while reinforcing the rules-based trading system. In response, the EU assured Canada that this measure is science-based and that these issues are also discussed at existing multilateral and bilateral fora. The EU agreed that officials would work together through the CETA Sanitary and Phytosanitary (SPS) Joint Management Committee to ensure sufficient time to discuss this issue further.

EU deforestation regulation

Canada emphasized that it shares the EU’s objective to prevent global deforestation. However, Canada raised concerns that the EU’s recent draft regulation on deforestation would create market access barriers for Canadian exports of several important agricultural products. Canada identified its specific concerns with certain compliance elements included in the proposed regulation, notably the geolocation requirement on the due diligence statement, which would be extremely difficult for many Canadian agricultural and forest product exporters to meet. Canada stressed the need for the EU to consider and evaluate all potential trade impacts of this legislation and requested flexibility in its implementation to avoid unnecessary and unintended market access irritants or barriers, particularly for countries with low deforestation risk such as Canada. Canada also expressed concerns regarding the inclusion of forest degradation in the scope of the draft regulation, as there is not yet an internationally accepted and operationalized definition of forest degradation.

In response, the EU highlighted that the draft regulation addresses a major global issue and that it is still under development and discussion. The EU reassured Canada that it had taken due note of the concerns raised and all comments received during the consultation process. The EU was unable to discuss further details on the issue in the context of the ongoing trilogue discussions in the EU and suggested to further engage on this once adopted.

Artificial intelligence and cybersecurity

Canada conveyed its interest in working collaboratively with the EU to ensure that the draft EU Artificial Intelligence (AI) Act would not result in technical barriers to trade on new intangible IT products for third parties, such as Canada, where micro and small providers of AI systems are most of the industry. Canada noted with appreciation the EU’s responses to Canada’s requests for modifications and their openness to discuss creative solutions. In response, the EU reiterated the importance of CETA as a forward-looking Agreement, stressed that CETA has the tools to discuss AI, and encouraged our officials to compare notes, as our approaches on AI are similar. The EU agreed to keep Canada informed of the development of the AI Act, highlighting the risk-based approach that would be taken to ensure the protection of citizens’ rights and values. The EU remains open to explore further the issue of possible mutual recognition of conformity assessment once the AI Act has been adopted.

In addition, Canada indicated that it shared the EU’s emphasis on the value of developing common criteria for cybersecurity, as laid out in the proposed EU Common Criteria (EUCC) cybersecurity scheme. However, Canada reiterated that a single standard for cybersecurity requirements exists, the Common Criteria Recognition Arrangement (CCRA), and that like-minded partners including several EU member states (Austria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Italy, Netherlands, Poland, Slovakia, Spain, and Sweden) have signed onto it. Canada requested that the EU maintain the agreed upon arrangement by modifying the EUCC to provide equivalent treatment for conformity assessments performed in different non-EU third parties, including Canada. In response, the EU explained that the Cybersecurity Act provides for the possibility to conclude mutual recognition agreements with third countries and mandates that each scheme provides for the conditions to do so and that mutual recognition will allow for less trade restrictions once implemented in 2023.

EU’s perspectives on reporting from the specialized committees, including on:

Agricultural issues

The EU stressed the importance of the Cheese Tariff Rate Quota (TRQ) to EU producers and reiterated its concern regarding Canada’s management of its cheese TRQ system. The EU believes that Canada’s choice to allocate 50% of the quota to Canadian manufacturers has led to a high transfer rate and subsequent transfer costs which are passed on to consumers. They also stressed that even if the quota is filled, the management system reduces EU’s competitiveness in the Canadian market. The EU pointed out that in response to Canada’s ongoing comprehensive TRQ review it submitted several ideas that it believes would improve the management of Canada’s TRQ system. The EU called for transparency from Canada in monitoring the operation of the TRQ on this issue. Furthermore, the EU reminded Canada of its commitment made at the 2019 CETA Agriculture Committee to consider “possible amendments to the transfer system, the minimum allocation quantity and increased transparency”.

Canada reiterated that it is in full compliance with its obligations under CETA. Canada stressed that the system is working well, noting the very high uptake of the TRQs (over 95%), which is nearly filled year after year with the available amounts increasing annually. Furthermore, Canada reiterated that it is undertaking a review of its TRQ allocation process, and that the EU is being consulted. Canada concluded by stating that while it remains open to discussing TRQ related issues, including the items identified by the EU, it has not committed to making any specific changes to the allocation or administration of its CETA TRQs. 

On Geographical indications (GI), the EU expressed appreciation for the efforts made by the Canadian authorities to inform EU stakeholders about the enforcement tools available in Canada and the EU committed to encouraging EU right-holders to use these tools. The EU expressed continued concerns with Canada’s system for administrative enforcement, stressing the importance of effective enforcement of GIs in Canada for EU stakeholders. The EU noted that it does not believe that Canada has given sufficient assurance that it can provide an effective system of administrative enforcement, citing EU complaints, which have been unsuccessful under Canada’s food safety and consumer protection program under the Canadian Food Inspection Agency (CFIA). This is creating frustration for these GI rights holders and is discouraging others from lodging complaints. Canada affirmed that enforcement by administrative action obligations under CETA ensures a clear process for addressing complaints on false and misleading labeling regarding origin, but does not provide any guarantee concerning the results of that process. The EU reaffirmed its belief that a list of authorized users in Canada of the eight GI names grandfathered under CETA would make it easier for EU right holders to assert their rights in Canada.

In response, Canada reiterated that there are effective mechanisms for the enforcement of GIs in Canada and that officials have undertaken extensive efforts to inform EU stakeholders about how to enforce their GI rights in Canada. Canada informed the EU that it is developing content for ¶¶ÒùÊÓƵ’s website to provide information to Canadian and EU stakeholders about CETA GI commitments, including grandfathering, as well as information on Canada’s regime for the protection and enforcement of GIs. Both Parties committed to making stakeholders on both sides aware of the scope and the nature of CETA provisions on the protection and enforcement of geographical indications.

On EU meat exports to Canada, the EU reiterated its request for Canada to clarify its process to recognize the meat inspection systems of remaining unrecognized Member States as a number of EU Member States remain unauthorized to export meat to Canada. Canada indicated that a technical call between Canada and EU experts would take place to help facilitate this work through the CETA SPS Joint Management Committee. The EU thanked Canada for its commitment to continue working with the EU to plan audits of the meat inspection systems of Member States interested in exporting meat and meat products to Canada in coming years.

Canada recognized the importance the EU has placed on this issue and reiterated that the CETA SPS Joint Management Committee has proven to be an effective forum to discuss this type of issue. Canada mentioned that the 2015 audit findings demonstrated that meat inspection systems were not consistently implemented in all audited Member States. As a result, Canada was unable to approve all EU Member State meat inspection systems as one entity. Canada underscored its commitment to continue working with the EU to make progress on the review of Member State meat inspection systems that are not currently recognized. Canada committed to collaborate with the EU to complete the necessary review and procedures required to support these market access requests.

Canadian select luxury items tax

The EU expressed its regret that the Canadian Select Luxury Items Tax was adopted by Canada in September 2022, and underlined its view that the tax disproportionately discriminates against European luxury goods, notably motor vehicles and boats produced by European industry. The EU noted that it regretted that the law did not take into account any of the EU comments submitted during the consultation process. The EU further argued that it could prove counterproductive to the adoption of EVs given how expensive they are currently.

Canada reiterated that this tax was a platform commitment in the 2019 election and proposed in Budget 2021, and that the luxury tax is imposed equally on both domestically produced and imported select luxury goods. Canada affirmed that, there is therefore no discrimination on EU imports to Canada. EU clarified that it considered this a de facto discrimination rather than a de iure discrimination.

Canadian green energy tax credits

The EU reiterated that fighting climate change is a priority. However, the EU expressed concerns about measures announced in the 2022 Fall Economic Statement, notably announced measures which aim to support the adoption of clean technologies in Canada and attract private capital investment including several announced tax credits for low-carbon energy generation and technology and hydrogen production. The EU said that in the selection criteria for projects of the new Canada Growth Fund, there are several tests, which stresses the “long-term benefits for Canada”. The EU underlined that advancing the green transition should be done in a manner that is mutually supportive and in a non-discriminatory manner. In this context, the EU noted its concerns with the United States Inflation Reduction Act. The EU requested additional information on the taxes and other measures announced in the 2022 Fall Economic Statement and to continue discussions also on how to ensure transparency for such measures and avoid negative effects on trade and investment.

Canada reassured the EU that there are no local content requirements or trade distortive conditions contained in the proposed measures. Canada noted that the Department of Finance would undertake public consultations with a broad range of stakeholders in the coming weeks, with a view to announcing additional measures in Budget 2023. Canada welcomed the EU to submit their views as part of this public process.

Discussion on investment protection

The EU confirmed that it is seeking a clarification of certain investment provisions in the Agreement through a Joint Interpretative Statement, not an amendment of the Agreement. The EU welcomed constructive discussions that are taking place between Canadian and EU experts on the proposed text relating to the provisions of two investment protection standards namely “fair and equitable treatment” and “indirect expropriation”. It underlined that the aim was to further clarify how those standards would be understood by the Investment Court System established under CETA. The EU expressed a hope for a quick conclusion of this process. The EU considered that the future Joint Interpretative Statement could give some important reassurances in the context of the ongoing ratification processes in EU Member States.

Canada recognized the importance of this initiative for the EU and its Member States and expressed its readiness to work constructively and expeditiously. Canada mentioned nonetheless that it has some reservations about some parts of the EU’s proposal, which risk creating confusion rather than clarity. Canada also underlined the need to ensure that any clarification would not constitute an amendment but rather a genuine interpretation of the Agreement.

Both Canada and the EU reaffirmed their intent to continue to work together constructively and expeditiously towards a Joint Interpretative Statement for adoption by the CETA Joint Committee.

Joint updates

The EU and Canada exchanged views on several joint updates concerning the following points:

Joint progress review on wines and spirits pursuant to CETA Annex 30-C

Canada presented the conclusions of the CETA Wine and Spirits Committee and thanked Committee officials for their hard work and collaborative approach in preparing the report. The report highlights that the work of the Committee has led to positive results. For example, Canada noted that imports of EU beverage alcohol in Canada grew by 18%, from CAD$2.1 billion in 2017 to CAD$2.5 billion in 2021, a positive outcome that should be promoted by both Parties.

The EU acknowledged this success, however emphasised that more work needs to be done under the Committee as it relates to amending the 2003 Agreement and its ongoing concerns regarding provincial liquor policy. The EU referred to Canada’s commitments to amend or remove certain provincial measures by 2023 and 2024 stressing that these must be implemented fully and in a credible manner especially measures in Quebec, Ontario and Nova Scotia. In addition, the EU raised specific concerns with two types of measures: (1) the differential taxes and mark ups giving preference to local producers; and (2) the measures that allow for direct delivery exclusively by local producers.

Canada restated its commitment to working with the EU to amend the 2003 Agreement and highlighted that work is well underway internally. Canada should be ready to move ahead as agreed this coming Spring. Furthermore, Canada noted the EU’s concerns with provincial liquor policy limiting market access but underscored that the report demonstrated clear progress and positive results for EU products in the Canadian market and that the focus should be placed on promoting the benefits and the good work achieved to date.

Joint update on implementation of the Trade and Sustainable Development Chapter and review of the implementation of the Joint Committee Recommendations on Climate, Gender and SMEs

On the Trade and Sustainable Development Chapter, the EU noted that since its provisional application, CETA has supported a broad range of sustainability initiatives, assisting EU and Canada’s respective effort in the transition to green economies. CETA’s trade and sustainable development (TSD) provisions spurred positive results, including the 2018 signing of the Joint Recommendations on Trade and Gender, Trade and SMEs, and Trade and Climate. The EU highlighted the 2022-23 TSD Work Plan which includes concrete actions to: facilitate discussions and collaboration on clean technologies and carbon pricing; and in line with the Joint Recommendation on Trade and Gender, ensure that women entrepreneurs can benefit from the CETA opportunities; as well as, exchange experiences, and cooperate to promote high labour standard in third countries.

In response, Canada expressed its enthusiasm regarding the outcome of the EU’s TSD review as it demonstrates once again Canada and the EU’s shared values in matters of labour and environment. However, Canada registered its disappointment with the EU’s reluctance to apply its new TSD enforceability approach to CETA (i.e., fines and/or sanctions for breaches of obligations). Canada asked that the EU reconsider its stance and agree to find a way to make the CETA labour and environment chapters enforceable. To avoid reopening the text of the Agreement, Canada suggested that there were flexible options to achieve this goal and that it remained open to discussing these further with the EU under the TSD Committee.

On SMEs, the EU recalled the 2018 Joint Committee Recommendation on SMEs, which underlined the importance of providing SMEs with useful and easy information on CETA and provides a framework to work together through the bilateral SME Contact Points that oversee this work and report on progress. Both Parties noted progress made to date, including the EU’s Access2Markets portal which allows SMEs to obtain all necessary information for trading under CETA. On climate, Canada responded by underlining the positive outcomes of the CETA Cleantech Summit. Canada also highlighted some progress made to implement Work Plans on Trade and Gender, and Trade and SMEs, noting an interest to see greater and increased collaboration on these issues in 2023.

Joint reporting on the EU-Canada Joint Customs Cooperation Committee

Canada highlighted the signing of a Mutual Recognition Agreement (MRA) regarding the EU’s Authorized Economic Operators program and Canada’s Trusted Trader program as an important milestone in cooperation. The MRA will streamline customs processes for commercial operators in both jurisdictions allowing trade between Canada and the European Union to be more efficient. Another key goal of the MRA is to strengthen trust and security in the supply chain to prevent criminal activity. It will allow trusted traders to trade more efficiently while allowing customs officials to focus on higher risk exporters in the fight to keep Canadians safe. Both Parties were pleased with this milestone and looked forward to experiencing the reciprocal benefits of a transparent and predictable trading environment that bolsters economic prosperity.

Joint update on the negotiations of a Mutual Recognition Agreement (MRA) concerning the professional qualifications of architects

The EU highlighted the positive progress made on the adoption of the Mutual Recognition Agreement for Architects (MRAA) negotiated between the EU and Canada under the CETA framework. The MRAA represents the first of its kind at the state level between two trading partners. The text of the CETA MRAA has been translated into all 24 of the EU languages and is being reviewed to ensure legal consistency in each of them. While this process takes time, Canada noted that it must be completed before the adoption of the MRAA, it expects to be completed by early 2023. Both Parties celebrated this milestone and acknowledged that this will set the tone for other professions in the future.

Joint update on the progress of the work under CETA's Regulatory Cooperation Forum

Canada and the EU recognized the numerous successes of the Regulatory Cooperation Forum (RCF) and acknowledged the importance of regulatory cooperation as a means to share information and reduce unnecessary regulatory differences, as well as to foster increased bilateral trade, investment, and innovation partnerships. In addition, Canada highlighted that the RCF is unique to CETA, representing a novel and important approach to the cooperation on regulatory matters between Canada and the EU. Both Parties continue to leverage the RCF to facilitate connections among multiple regulators, who continue to engage on diverse topics from consumer protection to specific product standards and identify potential emergent areas of interest. The RCF Co-Chairs further agreed to hold the next annual meeting in spring 2023. 

Joint update on the progress of the work at CETA's Raw Materials Dialogue

To conclude the joint updates, the EU highlighted the strong and fruitful cooperation with Canada on raw materials. They particularly underlined the work accomplished under the CETA bilateral dialogue and the Canada-EU Strategic Partnership on Raw Materials which was set up in June 2021. In its first year, the Partnership provided the framework for several important investments in the EU and Canada in the area of critical raw materials, the areas covered being battery value chain and rare earth elements. Under the Partnership, actions were also taken to support cooperation in research and innovation and in international fora. The EU underlined the complementarity of the Partnership with the annual bilateral dialogue on raw materials.  During the bilateral dialogue meeting in November 2022, the EU and Canada adopted the Progress Report for the Action Plan 2021/2022 and endorsed the next Action Plan 2022/2023. Both action plans include actions related to improved business opportunities for the Canadian and EU businesses, closer cooperation in research and innovation, as well as cooperation in international fora and on ESG standards. The EU reaffirmed their aim to continue deepening the valuable cooperation in the raw materials area by increasing value chain integration and resilience between Canada and EU.

Conclusion

EU announced it will host the next meeting of the CETA Joint Committee in Brussels in early 2024, marking the 6th anniversary of the Agreement.

The Co-Chairs acknowledged the important and constructive discussions of this year’s Joint Committee meeting. They also agreed to publish an agreed Joint Statement on Canada and EU’s respective websites and reiterated their commitment to work together in implementing CETA and in upholding the rules-based international trade system.