With United States President Donald Trump threatening to impose a 25% tariff on all goods entering the US from Canada, businesses are worried about the increased costs for export, disruption to supply chains, and the impact this will have on their bottom lines and even survival. This is creating a volatile environment for Canadian businesses exporting to the US and companies looking to enter the US market.
The United States has traditionally been the top destination for Canadian trade in goods and services. But it’s time to look to our European friends as a viable option. The European Union (EU) is the world’s second-largest economy, with a GDP of $19.4 trillion. It is Canada’s third largest trading partner after the US and China.
With a population of over 440 million in the EU, the Comprehensive Economic and Trade Agreement (“CETA”) concluded between Canada and the EU in 2017 offers Canadian businesses and investors significant opportunities to diversify export sales and services, reducing the dependency on an increasingly unpredictable US market.
The Opportunities of Expanding to the European Union
1. Market Access for Goods
For exporters and importers, CETA creates a nearly tariff-free trade environment (with the exception of a few products), benefiting businesses by lowering the costs of trading goods between Canada and the EU. This makes buying and selling products across the two regions more straightforward and affordable.
2. Access to Government Procurement Contracts
Canadian suppliers of goods and services can participate on an equal footing with EU suppliers for a wide range of government procurement contracts at the EU, Member State, regional and local levels.
3. Labour Mobility
CETA allows various categories of Canadian businesspeople, professionals and skilled technicians to work temporarily in the EU without visas or work permits. This will help businesses operate more effectively, whether they are service suppliers in consulting industries, businesses looking to service and support export sales, or businesses managing investments. Temporary entry will be available for terms of up to three years in the case of intra-company transferees and up to one year for contractual service suppliers and independent professionals.
4. Accreditation of Foreign Credentials
CETA allows for accreditation of foreign credentials, providing for the mutual recognition of professional, technical, vocational and academic credentials, enabling Canadian and EU professionals and skilled workers to work in Canada and the EU.
5. Regulatory Harmonization
Regulatory requirements, which are often greater barriers to trade than customs duties, under CETA are being harmonized so that specific categories of Canadian and EU goods, including new technologies, machinery and electronics, are recognized as conforming to each other’s regulations. CETA establishes institutional arrangements, such as the Regulatory Cooperation Forum, which will work toward regulatory convergence, including recognizing regulatory equivalence for Canadian and EU goods and services in each other’s markets.
Looking Forward
As the trade war and threats of tariffs continue to create uncertainty for businesses, Canadian companies and investors should not overlook the benefits of CETA. The agreement allows Canadians to establish growth overseas, thanks to the institutional and substantive arrangements built into the agreement.
As we look forward, CETA remains a key tool to secure long-term growth and success, helping Canadian companies thrive internationally despite the threat of diminished US market access ahead.e long-term growth and success, helping Canadian companies thrive internationally despite the threat of diminished US market access ahead.
