Canada and the European Union new free trade agreement - Essay Example

Canada and the European Union new free trade agreement The summit held on 26th of September at Ottawa was a sign that the negations between Canada and European Union on the idea of implementing a free trade agreement had to end. The Canada-European union trade agreement (CETA) stated that it would remove approximately ninety-nine percent of tariffs affecting the two countries. This aims at creating a spacious new market access opportunities in both investment and services. The agreement will benefit both countries in all aspects. This paper takes the thesis statement that both countries will benefit from the Canada-European Union trade agreement (CETA). Advanced manufacturing Canada as a country is renowned for its skillful ideas in research, innovation and invention and production of different types of manufactured products. These products include industrial and machinery, rail products, agricultural and medical equipments. The Canada’s gross domestic product was $42.7 billion resulting from employing approximately 418, 000 Canadian individuals in the manufacturing industry. On the other hand, the European Union benefits from Canada on products such as aero products, rail products and agricultural goods, and medical products, scientific and precision equipments. However, the trade between Canada and European Union is affected by 22 percent tariff on the goods exported and imported. This has been affecting the trade making the European Union to get goods at costly prices (Canada). Upon the completion of the agreement, the Canada-EU trade agreement will work to reduce and remove most of the existing EU tariffs on the manufactured goods, which include electrical parts and equipments and medical equipments. The reduction of physical barriers on the market will help to increase market access for exports and imports. Additionally, the agreement gives opportunities of helping Canada and EU identify different ways and steps of either preventing imposition of non-tariff barriers or direct deal with them when they arise. Ranging from the aerospace and other auto parts found in Quebec and Ontario to agricultural tools and equipments in Saskatchewan, to machinery found in Newfoundland and Labrador, most workers in the manufacturing sector will harvest the real benefits of new accessibility options found in the agreement (Eggertson). Automotive industry The automotive sector leads Canadas economy. It has an employment rate of approximately 117, 000 skilled individuals across the country. The automotive sector promotes 1 percent to the country’s gross domestic product. The Canadian automotive industry depends highly on trade, and it has approximately eighty-five automotive productions exported every year. The Canada-EU trade agreement gives a provision of history on the new market accessibility on the opportunities for the automotive sector. This increases the number of exports to Europe. The idea of removing tariffs along with the introduction of flexible rules will give rise to benefiting the automotive producers and the European countries. Exporting automotive goods to EU will make EU rich in such goods to facilitate their operations. The agreement will eliminate the EU’s ten percent on the passenger vehicles. This will make Canada increase its competitive advantage in EU market. This means that EU will import automotive goods from Canada only, which will facilitate good relationship. Additionally, Canada’s lucrative sector will benefit from the agreement since the EU’s tariffs on the sector will be eliminated apart from being incorporated into it (Eggertson). Additionally, the agreement involves several rules of origin that reflect the Canada’s position in the Integrated North American Automotive industry. The provisions aim at working with the current Canada’s chains of supply and make them able to export 100,000 passenger vehicles to Europe without any duty imposed on them. At the same time, Europe benefits from taxing individuals who buy and resale these automotive products. When individuals in Europe countries import automotive, they pay tax before doing their business. This means that the agreement will increase business activities in Europe. The agreement does not have static rules, but it has flexible rule that can be influenced or changed anytime. This provides extra flexibility in the situation that EU may strike trade deal with other countries such as United States. This will enable Europe to obtain same products but from other countries or producers. This will increase competition among producers, which will enhance production of quality products. Additionally, the agreement allows Canada to strike deals with other countries to have a notion of other currencies (Eggertson). Chemicals and plastics Depending on the many chemicals and plastics industries that Canada has, the agreement gives a wide variety of advantages on this sector. The industry employed approximately 107, 000 individuals in Canada in 2003 and has contributed about $14.1 billion to the economy of Canada. The industry produces inorganic and other organic chemicals and plastic packaging. This sector depends on exporting as its main marketing structure. In most cases, fifty-five percent of its productions are exported abroad. The exports made by the European countries amounts to approximately $2 billion per year between the year 2011 and 2013. These exports have tariffs of 4.9 percent imposed on them (Eggertson). The EU tariffs imposed on all plastic and chemical goods will be eliminated by the agreement. These products include photography chemicals, plastic floor coverings, and silicon. Now that both Canada and EU are the key destinations of foreign direct investment (FDI) in the plastics and chemicals sector, both Canada and EU investors will be given the certainty, transparency, and protection on their investment. Because of this, the agreement’s investment chapter will maximize given opportunities on the sector. Both EU and Canada will benefit from the agreement in the sense that workers from both areas will benefit from the identified market opportunities. Agriculture and Agri-food EU depends on the Canada’s produced agricultural foods. Canada is the main source of food in EU. However, the agricultural sector provides around three percent to the Gross domestic product of Canada. In Canada, the agricultural sector employed around 578,000 individuals in Canada despite their origin. The agricultural sector exported agricultural goods of averagely $2 billion between 2011 and 2013. Some of these products include wheat, soybeans, and other agricultural foods. With the implementation of the agreement, Canada wishes to expand its production of agricultural products. In the past years, the agricultural sector has been facing high EU tariffs of about 13.9 percent (Eggertson). Upon agreement on the terms and conditions of the agreement, approximately ninety percent of agricultural products will be duty-free. The Canada-EU trade agreement provides address to non-tariff blocks into the EU, for example, those relating to plant and animal health or food safety. Additionally, the agreement gives a chance to both countries to provide and deal with the non-tariff barriers into EU. For example, Canada and EU have are provided with the mechanism of cooperating to discuss the non-tariff barriers that come up from agricultural exports. They also hold the chance and responsibility to resolve such barriers. The Canadian agricultural products will be fully accessed in the new market. The decrement of tariffs on agricultural products will be of great benefit to both Canada and EU because of the Canada-EU trade agreement (European Commission Directorate-General for Trade). Food processing As a subset of the agricultural sector, food processing is an important sector in the economy of Canada and EU. Since food processing is a step from the agricultural sector, the various aspect involved food processing are part of the agricultural sector. All the tax reliefs on agricultural products affect the transformed products. The Canada-EU trade agreement goes wide to relieve the processing sector with barriers. These process benefits both EU and Canada since Canada will increase its exports while EU will increase its imports (Eggertson). International relationship Since the agreement reduces its taxes, Canada will be exporting and importing goods from EU. This increases chances of strengthening their international relationship since most people will be visiting EU to carry out their businesses. The continued access to EU may result to other aspects such as intermarriages, cultural exchange, and political exchange. With this agreement, business people from both countries will be meeting to share ideas on how to carry out their businesses. Because of this, more industries will be built and increase trading factors. Despite the fact that both countries will benefit from the agreement, Canada will experience certain challenges. The Canadian Centre for Policy Alternatives (CCPA) carried out an analysis on the secrets of the agreement. The agreement will weaken or reduce the ability of the Canadian government to regulate and modify on the public goods or by the use of local procurement policies in promoting economic growth in the country. The increment of exports to Europe as stated by the comprehensive economic and trade agreement may not materialize. Scott Sinclair, senior trade policy researcher in CCPA, stated that the Canadians are striving hard to sign a deal that may benefit only the large corporations. The Harper government states that the agreement will benefit the Canadian economy through providing companies with full access to EU’s five hundred million customers. The Harper government took almost five years to negotiate for the agreement. However, the federal government highlights that the deal denies the Canadian government to regulate and maintain the public goods on the public’s sake. The foreign changes on the Canadian protection rules for pharmaceuticals will influence delay in the availability of non-expensive generic medicines. This will happen if the agreement is implemented. This situation will then cost the Canadian economy a sum of $850 million in expenses for patented medicines. The final part of the agreement states that some of the corporations can sue governments over issues that companies think are discriminatory. From the business point of view, an ISDS is needed but most critics say that an ISDS gives corporations more power, which is not a healthy issue (Eggertson). Despite the fact that the agreement will remove all tariffs on the imports in Canada and EU, which may bring the possibility of more sales in Canadian companies, the agreement has no responsibility of reducing the Canada’s trade deficit of approximately $20 billion. Now that the agreement has liberalized the trade, some of the Canadian companies such as processed foods, textiles, and motor vehicles will find it very hard to compete. On the other hand, the provincial and municipal governments will be subjected different procurement commitments that may prevent officials from preferring certain local companies when giving out special tenders and contracts above different monetary level. This means that local companies will be greatly affected since they will have no chance to experience a glimpse of the agreement’s benefits (The Enhanced EU-Canada Economic Partnership). The Canada-EU trade agreement has great benefits to both Canada and EU ranging from technology, manufacturing sector, international relationship, processing sector, automotive sector and other sectors. This is because most of the tariffs will be eliminated to enable full access of Canadian companies to the EU market. From this point of view, as Canada will be benefiting from low rates of tariffs, the EU will benefit from acquiring beneficial products from Canada. Additionally, Canada will increase its gross domestic product by selling its exports to EU. Both countries will have a chance to strike deals with other countries to increase the competitive advantage. However, despite the benefits mentioned, Canada is still at risk if they fully depend on the agreement. This is because the agreement denies the government a chance to control public goods on the public’s sake. Due to these issues, Canada should not only depend on the agreement but it should work to be dependent (The Enhanced EU-Canada Economic Partnership). Works cited "Canada, EU unveil historic free-trade agreement." The Globe and Mail. N.p., n.d. Web. 24 Oct. 2014. . Eggertson, L.. "Canada-EU trade agreement expected to increase drug costs." Canadian Medical Association Journal 185.17 (2013): E782-E782. Print. "European Commission Directorate-General for Trade." Canada. N.p., n.d. Web. 24 Oct. 2014. . News, CBC. "Summary of Canada-EU free trade deal tabled." CBCnews. CBC/Radio Canada, 30 Oct. 2013. Web. 23 Oct. 2014. . "The Enhanced EU-Canada Economic Partnership: Challenges and Opportunities for SMEs A Project Of The Italian Chamber of Commerce in Canada - West." EUCanada Free Trade CETA. N.p., n.d. Web. 24 Oct. 2014. . Read More