10 October 2019
The Brexit Effect: CETA and the WTO
Unless the latest deadline is another case of “The Boy Who Cried Brexit”, this Hallowe’en, October 31st, may be the day that the United Kingdom formally leaves the European Union. However, the UK Parliament’s European Union (Withdrawal) Act, which requires parliamentary approval of any withdrawal agreement negotiated between the UK and the European Union, and which will repeal the European Communities Act, may apply – thus postponing again the anticipated withdrawal.
The effects of this looming departure will surely ripple across the pond to Canada, where we have substantial long-standing trade and cultural ties with the UK.
A tie which Brexit may sever is one which is built into the Comprehensive Economic & Trade Agreement (CETA), concluded between Canada with the European Union two years ago. CETA came into effect on September 21, 2017, opening the door for free trade, eliminating 98% of tariffs as well as the significant reduction and removal of non-tariff barriers such as those impeding the movement of business visitors between Canada and EU member states.
CETA streamlined entry into Canada for qualifying citizens of Canada and EU member states by waiving certain requirements, such as the procurement of a work permit and the Labour Market Impact Assessment (LMIA), which involves employer advertising requirements and processing times to demonstrate that no Canadian citizens or permanent residents are available to fill a position.
Chapter 10 of CETA entitled, “Temporary Entry and Stay of Natural Persons for Business Purposes” covers three categories of these business visitors: key personnel (Article 7); contractual services suppliers and independent professionals (Article 8); and short-term business visitors (Article 9).
Impact of Brexit
If the UK and EU agree to a Withdrawal Agreement (a “deal”) before October 31, we may see a “soft Brexit” wherein the UK will continue to be treated as if it were an EU member for a certain transition period. During this period, existing rules, regulations, and international agreements such as CETA will continue to apply to the UK while the country negotiates its future relationship with the EU.
However, if the UK and EU can’t agree, we may see a “hard Brexit”. In this scenario no deal is struck, and the UK will abruptly cease to be an EU member as of November 1st. If a no-deal Brexit materializes, the CETA umbrella will no longer capture the UK and some other agreement will have to fill the vacuum.
CETA vs. WTO
This “other agreement” will be the existing scheme under the World Trade Organization (WTO). Outside CETA, short-term business visitors may apply under the International Mobility Program as provided by the General Agreement on Trade in Services (GATS).
Business visitors could apply for authorization to work without a work permit or LMIA, pursuant to section 186(a) of the Immigration and Refugee Protection Regulations. These “business visitors” refer to people to intend to engage in international business activities in Canada without directly entering the Canadian labour market.
Generally speaking, qualifying “business visitors”, as defined in s. 187 of the Regulations, may stay up to 6 months. For stays longer than 6 months, Canada’s border services issue a visitor record and indicate the reason for the additional time (upon satisfactory documentation supplied by the applicant).
Chapter 10 of CETA expanded the available criteria for individuals to avail themselves of International Mobility Program options. As mentioned previously, these include:
- Key personnel: company transferees, investors, and business visitors for investment purposes
- Contractual service suppliers and independent professionals
- Short-term business visitors
Under CETA, applicants under the 1st and 2nd categories may qualify to stay up to a year (with possible extensions), while short-term business visitors in the 3rd category may stay up to 90 days in a six-month period, unless eligible for other durations.
CETA provisions apply to Canada and EU member states, who are the “Parties” to the agreement. Thus, if the UK exits the EU and ceases to be a “Party” as defined by Article 1.1 of CETA, the above expansions may no longer be available to UK nationals or residents without an EU passport.
We will be watching carefully to see how things evolve in the coming weeks and, if history has taught us anything, be prepared for all possible outcomes.
Celso Boscariol, Q.C. is a Partner in our Business Law Group as well as President of both the European Union Chamber of Commerce (Canada-West) and the Italian Chamber of Commerce (Canada-West), amongst other distinctions. He is a frequent writer and presenter on CETA and its implications for Canadian and international business.