By Steve Verheul and Mark Camilleri

December 6, 2024

As Canadians and Europeans continue to digest the outcome of the 2024 U.S. presidential election, they would do well to take the tonic offered by the Canada EU economic and trade relationship. Since the signing of the Canada-EU Comprehensive Economic and Trade Agreement (CETA) in 2016, bilateral merchandise trade has increased by more than 65 per cent (equalling C$126.5 billion in 2023) across a variety of different sectors. Services trade has also enjoyed impressive growth, increasing by almost 73 per cent (equalling C$64.9 billion in 2023). In addition to being consequential, Canada-EU trade under CETA has proven to be wide-ranging (with a greater increase in trade by small and medium-sized enterprises) and resilient.

Yet, CETA is about much more than trade. Negotiated by both the Harper and Trudeau governments, it was intended to be, as its name implies, a more comprehensive agreement. It was meant to provide a constructive framework for an ambitious engagement between like-minded partners on a broad range of non-tariff issues, including regulatory cooperation. In this regard, CETA is also working. Since its application, Canada and the EU have been progressing on important bilateral issues, including a productive dialogue on raw materials, clean energy cooperation and digital trade.

In an era of rising global protectionism and supply chain disruptions, CETA represents a strategic policy instrument for Canada, providing the means to meaningfully diversify its trade relationships and strengthen its economic resilience with a like-minded party.

Nevertheless, CETA remains only partially ratified, with 10 EU member states, including France and Italy, yet to approve. (It must still be ratified by: Belgium, Bulgaria, Cyprus, France, Greece, Hungary, Italy, Ireland, Poland and Slovenia). Although a lengthy EU treaty ratification process is not unique to Canada, Canadians should not be complacent.  Achieving full ratification is not merely a matter of preserving an economic advantage for Canada but should serve as a safeguard to its wider economic security.

Background on CETA Ratification

Since approval of the agreement by Canada and the EU institutions, CETA has been provisionally applied since September 2017.  Its full implementation, however, is dependent on approval by all EU member states because its scope covers areas of shared and exclusive competences of both the EU and its member states (in EU parlance, it is a “mixed agreement”).

From the start, CETA ratification has been mired in varying degrees of political resistance in several EU countries.  Concerns about Canadian regulatory standards, the erosion of national sovereignty and CETA’s Investment Court System (ICS) – which some have argued gives too much power to corporations – fuelled opposition to CETA even before it was signed. Various attempts have been made to assuage these fears.  In 2019, the European Court of Justice (ECJ) ruled that CETA’s ICS mechanism complies with EU law, ensuring regulatory autonomy and safeguarding public interests. However, persistent opposition to CETA highlights the growing resistance to trade agreements and backlash against globalization, even in EU countries that are clearly benefitting from a higher trade surplus with Canada.

Why Should Canadians Care About CETA Ratification?

If CETA is in force, even provisionally, some may wonder why we might care that it has yet to be fully ratified. Indeed, is this not more of an EU issue as they have more to lose by not getting CETA ratified? To be sure, a failure to achieve ratification would seriously undermine the EU’s credibility in the global trade arena (as per the oft quoted phrase, “If the EU cannot have a trade deal with Canada, then who can it have one with?”). However, a failure to ratify, or a prolonged ratification of, CETA also carries other potentially negative implications for Canada.

Economically, non-ratification creates uncertainty for businesses that rely on cross-border investment and trade in goods and services.  It is not unreasonable for businesses on either side of the Atlantic to question the value of investing more into Canada-EU trade if there is a risk that the agreement will not last.

Non-ratification precludes further improvement of the agreement. CETA and its supporting governance architecture (including many specialized committees and dialogues) is largely based on a 2008 economic study which does not reflect the changes to today’s economic realities. As Canada and the EU have negotiated new bilateral partnership agreements in key sectors such as raw materials, energy and digital trade, such agreements currently sit independently of, rather than within, the CETA governance framework. This makes for a less efficient model of governance and cooperation. The world has changed and CETA should be updated to reflect this.

Strategically, CETA supports Canada’s trade diversification goals. In an era of rising U.S. protectionism and transactional leadership, safeguarding healthy trade relationships with an important trading block like the EU is vital. A fully implemented CETA would enhance Canada’s leverage in negotiating with the U.S.

Failure to ratify CETA would also affect Canada’s credibility and diminish its own image in the world. An EU seen to be quitting CETA would leave Canada as the proverbial spouse at the altar.  Having an agreement with an important and like-minded partner like the EU gives Canada continued influence in shaping international trade norms and reinforces our reputation and tradition as a trading power. It is clearly in the interests of Canada that the Europeans not only ratify CETA, but also remain committed to supporting a rules-based trading order. Canada cannot afford to have another major trading partner ‘go it alone’.

Challenges to Full Ratification

There is no single explanation for why the remaining EU member states have not yet ratified CETA. On 30 October 2024, the Canada EU Trade and Investment Association (CEUTIA) hosted a discussion with Canadian bilateral business groups in eight of the 10 member states that have yet to ratify CETA.  While some of the “historic” issues for non-ratification (namely concerns over ICS and the space for governments to regulate) remain, they were not the key feature of the discussion. Rather, in most cases, CETA ratification is a function of domestic politics. At best, CETA ratification is not a political priority in some member states; at worst, CETA has fallen victim to trade scepticism and anti-globalization (if not nationalist) agendas that have little to do with Canada.

EU procedural ambiguities have also impaired CETA ratification. There is no formal coordination of CETA ratification between the EU and its member states, nor any deadline to do so. Indeed, member states can delay or block agreements to exert political pressure or because of inconsistency between EU trade policy commitments and national (or sub-national) parliaments’ priorities. In 2016, the Belgian region of Wallonia (one of the five regional governments in the country required to approve CETA) held up the signing of the agreement by refusing to give its consent to CETA.  Although a compromise was reached to accommodate some of its government’s concerns, Wallonia has not yet agreed to CETA’s ratification. In 2020, the parliament of Cyprus actually voted against CETA ratification largely due to the lack of a geographical indication for halloumi cheese within the agreement. That vote, however, is not considered binding and it is hoped that the government will bring CETA to another parliamentary vote at a later time.  Such lack of clarity in procedure offers little predictability or confidence as far as CETA ratification is concerned.

Efforts to Address Challenges

Clearly there is a need for targeted strategies to address the concerns of non-ratifying states (and in some cases sub-national governments) while preserving CETA’s core principles.

To date, Canada has undertaken important political and diplomatic outreach to each of the non-ratifying EU member states. This includes engaging directly with national governments and stakeholder groups to build public support for CETA. This work is commendable and should continue with greater support to local Canadian bilateral business groups (who, as private actors, are often well placed to identify and engage with local actors, counter anti-trade narratives and otherwise promote trade agreements like CETA).

Canada should also encourage wider Canada-EU collaboration to promote ratification.  In addition to continuing to align CETA with broader EU priorities, such as the green and digital transitions as well as broader issues of economic security, Canada should encourage more exchange and dialogue among national parliaments and the European Parliament. This will help ensure that CETA ratification remains a priority.

In her address to the European Parliament’s Canadian delegation on 21 November 2024, Canadian Ambassador to the EU Ailish Campbell encouraged the delegation to establish a network with national parliaments to share information and help promote CETA ratification. This is a laudable suggestion. As the only directly elected institution of the EU, the European Parliament is both a legitimate and appropriate convenor of such a forum, where legislative equals can address concerns and otherwise advance ratification.

Finally, to support its diplomatic and political efforts, Canada should commission a new study that provides more updated information on the untapped potential of the Canada – EU economic and trade relationship with a focus on further trade liberalization on key sectors. While there have been several CETA-related studies to date, these have been retrospective analysis; a new study should – like the 2008 study – be forward-looking and offer guidance and details of specific areas to liberalize. Such a study would set a new base line on not just how, but why CETA should be ratified and progressed.

In recent years, the Canada-EU economic and trade relationship, underwritten by CETA, has gone from strength to strength. While the EU will not supplant the United States as Canada’s biggest market anytime soon, it does offer a degree of assurance and leverage in an otherwise troubled geopolitical environment. CETA is more than just a trade agreement; it is a testament to Canada’s and the EU’s commitment to a rules-based international trade order and to fostering partnerships rooted in mutual prosperity.  Full ratification of CETA is therefore not just an economic imperative for Canada; it should also be seen as a key priority to secure a resilient and diversified global trade presence.

Steve Verheul served as Canada’s Chief Trade Negotiator from 2017 to 2021 and was responsible for negotiating CETA and the CUSMA. Steve serves as an advisory board member of the Canada EU Trade and Investment Association (CEUTIA).

Mark Camilleri is a Brussels-based Canada and EU regulatory lawyer and Special EU Advisor to the Business Council of Canada.  Mark is President and founder of the Canada EU Trade and Investment Association (CEUTIA).