Directorate-General for Trade
Thank you for the opportunity to participate in the Directorate-General for Trade’s consultation on the future of European Union (EU) trade policy. The Canadian Chamber of Commerce is Canada’s largest business association, representing companies of all sizes in all sectors and regions of the country. We are Canada’s representative at numerous international business forums such as the B7, B20, and Business at OECD, and work closely with Business Europe as well as EU Member State-level business federations. The Canadian Services Coalition is housed within the Canadian Chamber and is the only cross-sectoral group in Canada focused on international services trade issues. The Canadian Services Coalition collaborates closely with its counterpart the European Services Forum on issues related to international trade in services across all modes of supply. This represents both the views of the Canadian Chamber and the Canadian Services Coalition.
The EU’s trade policy consultation comes at a timely juncture given the precarious global trade situation caused by COVID-19. This submission covers actions that the EU can deliver on a bilateral basis with the Government of Canada, as well as work the EU and Canada should undertake on a multilateral basis, such as digital trade and industrial subsidies.
Canada-EU Bilateral Trade
This September is the third anniversary of the Comprehensive Economic and Trade Agreement (CETA) coming into force. At a macro level, the CETA has supported an increase in exports. In 2019 Canadian exports to the EU of goods and services increased 7.7% and 3.3%, respectively. EU exports to Canada of goods and services increased 4.2% and 0.7%, respectively.
However, despite the increases in trade CETA has not yet reached its full potential. There is a critical need to minimize the spectrum of non-tariff measures that limit trade, with particular emphasis on agriculture, services, and procurement. Building on these provisions under the auspices of CETA provides an opportunity for the EU and Canada to be global standard setters when it comes to building a sustainable global trade system. This is particularly critical as climate change and ESG considerations increasingly shift to the centre of business and political dialogues.
For the global trade system to deliver benefits to businesses and consumers, it is important for countries to abide by the spirit and letter of their trade obligations since it provides critical certainty for importers and exporters. For the EU to maintain its position as a defender of rules-based trade, this includes the application of its agriculture commitments in CETA. A key agriculture sector issue is non-tariff barriers that impact the crop sector. As outlined below, the EU can undertake a number of measures that would provide diversified food input supply chains for EU citizens by enabling greater access to safe Canadian products.
The timely establishment of harmonized MRLs is critically important to producers in both markets to allow the use of crop protection tools as they become available. Joint reviews facilitate this outcome as well as foster greater alignment between science and policy that is required by the crop protection industry’s innovation pipeline.
There is also an important linkage between trade policy and the European Green Deal announced last year. The European Green Deal and its related strategies will potentially impact the way Europe both produces and sources food through trade. The Strategies rightly note the need for environmental sustainability in food systems, including better food security, agriculture that is more sustainable, biodiversity enhancement, and the need for farmers to continue to be profitable. These are aspirations shared by Canadian industry, even if our approaches presently diverge.
Farming practices in both markets depend on continuing innovation and broad adoption of new technologies to provide healthy foods, using resources more efficiently, and improving sustainability. The EU’s aspiration to require global suppliers to meet all of the EU’s standards with respect to pesticide use, and to eliminate global use of all pesticides not registered in the EU, requires technical dialogue with trading partners to avoid unintended consequences both within and outside of the EU. Technical dialogue is also required to ensure that trade obligations are met. One example we would encourage the EU and Canada to emulate is the North American model of intergovernmental and industry collaboration on crop protection issues.
The North American Free Trade Agreement (NAFTA) established a Technical Working Group on Pesticides under its Committee on Sanitary and Phytosanitary Measures. This facilitated cost-effective pesticide regulation and trade among the three countries through harmonization and work sharing while protecting human, animal, and plant health. The Working Group’s success is evident through its active work program over nearly a quarter of a century and its continuation under the Canada-United States-Mexico Agreement that came into force this year. In the North American model, a parallel Industry Working Group engages directly with the Technical Working Group on Pesticides to inform the development of its strategic objectives, prioritization of activities and annual work plans. Where appropriate it also facilitates participation by national grower associations and the pesticide industry in work plan activities, information exchange, and meetings.
A Technical Working Group on Pesticides under CETA would generate similar value using this same proven model with governments working closely with external stakeholders. This Working Group would provide a valuable forum for the appropriate subject matter experts and complement what is happening under other institutional bodies created through the CETA.
Recommendation #1: Establish a Technical Working Group on Pesticides under CETA with a mandate to develop a pathway to enhance Pest Management Regulatory Agency and European Food Safety Authority collaboration, as well as lay the groundwork for resolving maximum residue level (MRL) misalignment, including by looking at increasing the frequency of joint reviews, and other policy alignments facilitate trade and contribute to each country’s sustainability goals.
Recommendation #2: Use the CETA Biotech Dialogue and Regulatory Cooperation Forum to increase the predictability and efficiency of approvals to reduce asynchrony between Canada and the EU, and have a goal in both countries of gaining approvals within 24 months or less of submission.
Recommendation #3: Leverage the CETA Biotech Dialogue as a forum to exchange information on forward-looking issues pertaining to plant breeding innovations in line with the WTO statement International Statement on the Agricultural Application of Precision Biotechnology, which called for countries to “coordinate efforts to ensure that the regulatory approaches for these techniques, which include gene editing, are scientifically based and internationally harmonized.”
Recommendation #4: Use the CETA Agriculture Committee as a forum to discuss responses to issues of low-level presence.
CETA also provides a pathway for Canadian meat producers to access the EU market. However, market access requires that tariff-rate quotas gained through CETA are not nullified by SPS issues, including pertaining to anti-microbial resistance. AMR is a complex international health issue that requires a coordinated global approach, as was noted in the EU’s statement at the November 2018 meeting of the WTO Committee on SPS Measures. Divergent approaches to tackling AMR could lead to the installation of measures that are more stringent than necessary to protect animal and human health. As the European Commission begins the implementation process for Article 118 of Regulation (EU) 2019/6, it is critical that third country governments and industry have the opportunity to comment before it comes into effect.
Recommendation #5: The EU provide ample opportunity for third countries to comment on the implementation details for Article 118 of Regulation (EU) 2019/6 to minimize undue restrictions to trade.
The EU has notably emphasized the importance it places on animal welfare issues in its recent COM (2020) 381 Farm to Fork Strategy. The Strategy particularly stated that “EU trade policy should contribute to enhance cooperation with and to obtain ambitious commitments from third countries in key areas such as animal welfare…” The issue of animal welfare has also been a priority for the Canadian government and the European Commission in the context of the CETA Regulatory Cooperation Forum. The Canadian business community remains a strong advocate for animal welfare and shares the desire to ensure well cared for animals. However, it is critical that the EU closely collaborates with third country partners to ensure measures taken are appropriate for the region, are outcome focused and do not become an undue barrier to trade.
Recommendation #6: The EU’s approach to animal welfare standards should provide ample opportunity for third countries to comment, as well as take an outcome-based approach that recognizes regional differences. The EU should also ensure its measure do not diverge from international guidelines, including through Codex and OIE.
With respect to the services sector, the CETA’s chapter on the mutual recognition of professional qualifications provides an ambitious framework to enhance the ability of companies to move talent where it is needed most. It is also a key tool for enabling companies to derive greater value from the CETA’s labour mobility provisions.
Recommendation #7: Work with the Canadian government on facilitating and encouraging more professions to utilize the mutual recognition of professional qualification chapter in CETA.
The CETA can also be used as a forum to foster greater collaboration to strengthen healthcare sector practices. In a context where public finances are facing the strain of fiscal measures to respond to COVID-19 and demographics are rapidly shifting, health policy needs to be delivered in innovative ways. The EU and Canada share common interests in ensuring public authorities are simultaneously able to achieve value for money and deliver the best possible health outcomes.
Recommendation #8: Work with the Canadian government to use the CETA’s institutional structures as a forum to share best practice on outcome-based procurement practices for government healthcare authorities, including through the involvement of Canadian provinces and EU Member States.
Lastly, the CETA also contains forward looking provisions in Article 3.8 and 3.9 in the Protocol on Rules of Origin and Origin Procedures that permit the opportunity for cumulation in the future. As companies face a proliferation of preferential trade agreements, it is important that rules of origin enable global supply chains rather than inhibit their growth. Permitting cumulation in rules of origin is a critical tool to allow companies to have flexibility with their production models.
Recommendation #9: Work with the Canadian government to explore priority sectors where cumulation in rules of origin could enhance trade.
In addition to the critical measures that can be taken in a bilateral context, the EU has an important leadership role to maintain in developing global trade rules.
A key issue is work to tackle the problem of distortive subsidies. Canadian and European companies are continually at a disadvantage in domestic and foreign markets when forced to compete against businesses that have the ability to operate on non-commercial terms. This issue will only become more pressing as governments subsidize their domestic industries in the context of the post-COVID-19 economic recovery. The trilateral EU-US-Japan proposal last year was a helpful first start in the process to develop global disciplines.
Recommendation #10: Prioritize work with Canada at multilateral forums such as the WTO, OECD, and G20 to make progress on developing disciplines on distortive subsidies. The EU should also continue to engage through the Ottawa Group as a way to further develop proposals that can be brought for discussion to the wider WTO membership.
The EU needs to continue to play a leadership role in the WTO Joint Statement Initiative discussions on E-commerce. The importance of developing modern digital trade rules is well established, and the WTO is the only global forum able to convene a critical mass of countries to reach binding and enforceable digital trade rules. Canadian businesses are working within the GDPR framework but it remains an impediment for reaching global standards that will facilitate trade. The WTO e-commerce discussions are also a vital forum for building on the Trade Facilitation Agreement, which is critical for businesses to reach new customers.
Recommendation #11: Continue to engage in the WTO e-commerce discussions, with a particular focus on working with likeminded countries to reach a consensus on cross-border data flow provisions that will enable companies to access new customers and find efficiencies through third-party providers. As well, the EU should focus on delivering TFA+ provisions that will convert best endeavours to binding obligations, encourage paperless trading, and simplify return procedures.
Border Adjustment Measures
The Canadian business community remains wholly supportive of ensuring global trade contributes to addressing challenges related to sustainability and climate change, and our members are closely monitoring the potential implementation of a carbon border adjustment (CBA).
At present, the Canadian Chamber is consulting members to formulate a policy position on CBA measures. As Canada has been a first mover in establishing carbon pricing regimes, many of our energy-intensive and trade exposed industries see the merit of establishing carbon border adjustment measures. In particular, Canadian manufacturers have significant concerns about their competitiveness against other jurisdictions that have not instituted as stringent environmental regulations and carbon pricing regimes. CBA measures could ensure that global trade remains fair between nations that may not have equivalent carbon pricing systems.
It is vital that any CBA implemented by the EU is robustly assessed to ensure it remains consistent with WTO commitments. As well, given the complexities of global supply chains it will be important to maintain transparency and simplicity in how a potential CBA is administered. For example, if it is being contemplated in the EU, measuring and knowing emissions associated with component parts produced in jurisdictions outside of Canada could be challenging and significantly increase the cost of business. Providing predictability will be a way to ensure that we are balancing economic and environmental imperatives.
Recommendation #12: The EU work with the Canadian government and business community to ensure any methodology recognizes Canada’s carbon pricing framework, and that any EU measures remain WTO compliant, transparent, and predictable for businesses.
Thank you for your consideration of our submission into the EU’s trade policy review. We would be happy to discuss further any aspects of this submission.
Senior Director international Policy
Canadian Chamber of Commerce