Presentation from the Dickinson Wright Webinar "Across the Pond: Canada-EU Comprehensive Economic and Trade Agreement (CETA)" presented by Brenda Swick on May 16, 2017.

1. Across the Pond:
Canada-EU Comprehensive Economic and
Trade Agreement (CETA)
May 16, 2017
Toronto, Canada
Brenda C. Swick
Bswick@dickinsonwright.com
Daniel Ujczo
ducjzo@dickinsonwright.com
Michael Weinczok
mweinczok@dickinsonwright.com
Dylan E. Augruso
daugruso@dickinsonwright.com

2. SPEAKERS
2
Brenda Swick
Trade and Government
Contracting Partner
Daniel Ujczo
Cross Border Business
Development Director
Michael Weinszok
Financial Services and
Insolvency Partner
Dylan Augruso
Student at Law

3. OBJECTIVE
• Backdrop against current NAFTA “upheaval”
• Overview of CETA with deeper dive in subsequent sessions
• July 1, 2017 implementation - duty free day!
• Questions and Answers
• Identify Areas of Further Interest
– Specific Sector?
– Rules of Origin?
– Origin Quotas?
– Government Contracting?
– Services?
– Dispute Settlement?
3

6. 6

7. 7
NAFTA

8. 8

9. 9

10. AND THE THIRD . . .
10

11. 200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09
9/11
WHTI passed
Status Quo? NO!!!

12. The Policy – Old
• Rules of Origin (ROO) for a New Economy
• Digital Chapter and E-Commerce (e.g., de
minimis rule USD 800/CAD 20)
• Intellectual Property
• Dispute Settlement (Chapters 11, 19, 20)

13. THE PUBLIC
13

14. THE PUBLIC
14

15. The Public

16. 16
THE POLITICS

17. The Politics

18. NAFTA NEXT
18

19. FRAMEWORK
1. Timing and Tempo
2. Tone and Tenor
3. Targets and Topics
19

20. TIMING & TEMPO
• Appointment of USTR Lighthizer
• Meeting with Senate Advisory Group
• 90 Day Consultation (U.S.) and Canada
Consultations (Mexico Complete)
• Formal in Fall 2017
• Trade Promotion Authority /
Fast Track into 2018
20

21. TIMING & TEMPO (cont.)
• 2018 July Mexico Presidential Elections
• 2018 U.S. Midterms
• 2018 TPA Expiration
• 2019 CDN Elections
• Alternative – “Tweak” (e.g., Rules of Origin) /
Do No Harm
21

22. TENOR & TONE
• Trump – Withdrawal, Softwood, Dairy/ Supply
Management, Buy American 2018 TPA
Expiration (Watch Gypsum / DryWall)
• U.S. Congress
• Canada Response (B.C. Election / Ontario)
• Mexico
22

23. TARGETS & TOPICS
23

24. TARGETS & TOPICS (Cont.)
• Rules of Origin – Nothing from China or its
proxies (what about sensors, technology?)
– Opportunities for companies that need updates
such as chemicals.
• Supply Management – Dairy, Poultry, Eggs vs.
U.S. Sugar, Corn, Rice, Soy
24

25. TARGETS & TOPICS (Cont.)
• Digital Chapter – No duties on x-border data
flows; no localization requirements; consumer
and privacy protections; internet of things
access
• Intellectual Property – Pharma; Counterfeit
Goods
25

26. TARGETS & TOPICS (Bad)
• Dispute Resolution – U.S. hates; Canada
considers it national pride
• Softwood Lumber
• Government Procurement / Buy America
26

27. TARGETS & TOPICS (“Shoulds’”)
• Certify Supply Chains as “AmeriCan Made”
• Beyond the Border
• Workforce Mobility and Development
• “Stitch North America Together”
27

28. TARGETS & TOPICS (Go Forward)
• Regulatory Cooperation Council (RCC) – U.S. 2
for 1 rule allows for international
harmonziation. Win for Trump Admin.
28

29. TARGETS & TOPICS (Cont.)
• Example: Food Safety Modernization Act and
Safe Food for Canadians Act
29

30. UNDERSTANDING CETA
• History of CETA free trade negotiations
• A “new generation” free trade agreement
– trade in goods;
– trade in services;
– labour mobility;
– investment protection;
– intellectual property; and
– government procurement.
• Gateway to EU companies to invest in Canada then use Canada as a “gateway” to
conduct business on a free trade basis in both North America using NAFTA
• Implementation process in Canada and the EU
– Provisional application – 99% duty free
30

31. OPPORTUNITIES IN THE EU
CANADA EU
35 million consumers 500 million consumers
$1.7 trillion (GDP) $16 trillion (GDP)
1 state 28 member states
31

32. CANADA & EU US TRADE IN PERSPECTIVE
US ($b) EU ($b)
Exports of goods 392 42
Imports of goods 360 52
Export of services 40 13
Import of services 57 15
• Canada is EU’s 12th
largest trade partner (1.8% of its exports)
• EU is Canada’s 2nd
largest trade partner (9.5% of its exports)
• EU is Canada’s second largest source of foreign direct investment ($180 b)
32
Source: Statistics Canada (2016)

33. PROVISIONAL APPLICATION: JULY 1, 2017
• Bifurcated Agreement therefore provisional implementation required
• European Parliament approved the Agreement on February 15, 2017
• Provisional Implementation of CETA
– CETA implementation legislation, An Act to implement the Comprehensive Economic and Trade
Agreement between Canada and the European Union and its Member States and to provide for
certain other measures (Bill C-30), received third reading before the Senate on May 11, 2017 and
comes into effect July 1, 2017
• Market access provisions, tariff cuts and government procurement rules –
will come into force provisionally and immediately on July 1, 2017
33

34. MARKET ACCESS
• Reduction and elimination of duties on July 1, 2017
– upon coming into force 98 percent of EU and Canadian tariff lines will be duty-
free - compared with just 25% today
• Significant reductions for some sectors
– within seven years, 99 percent of EU and Canadian tariff lines will be duty-free
• Key sectors subject to duty phase-out
– EU – automobiles, fish and seafood products
– Canada – automobiles and ships
• Fish and seafood products: full duty free access will be phased in over
3-7 years using TRQs
34

35. TARIFF ELIMINATION:
CANADIAN INDUSTRIAL GOODS
• 99% eliminated on July 1, 2017
• Forest & Metal products:
– All Canadian products will be tariff free from tariffs ranging up to 10%
• Significant advantage over competing imports from US and China into EU
• Oil and Gas Products
– Duty free (current duty up to 8%)
• Automotive & Parts
– EU duty on Canadian auto parts eliminated (currently up to 4.5%)
– Duties eliminated immediately on some vehicles such as road tractors and fire fighting
vehicles
– Canadian produced automobiles may be exported duty free provided 50% of the
content is Canadian
– TRQ for up to 100,000 Canadian made automobiles under more liberal rule of origin
(with Canadian content as low as 20%)
35

36. 36
TARIFF ELIMINATION:
CANADIAN INDUSTRIAL GOODS
• Chemicals and Plastics:
– Duty free (current duty up to 6.5%, average duty of 4.9%)
– Canadian exports of chemical and plastics to EU worth approx. $2 billion per year
• Telecommunications
– Duty free (current duty up to 14%)
• Advanced Manufacturing
– EU duties on various machinery, parts and equipment eliminated
– Examples: machinery and equipment (currently up to 8%), medical devices (8%), rail
products (3.7%), electrical parts and equipment (14%) and scientific and precision
instruments (6.7%)

37. TARIFF ELIMINATION:
EU INDUSTRIAL GOODS
• Automobiles
– Duty of 6.1% to be phased out over 7 years
• Vehicles (except for transport of people)
– Includes: motorcycles, bicycles, tractors, recreational vehicles
and parts and accessories
– Duty free (current duty up to 20%)
• Chemicals and Plastics:
– Duty free (current duty up to 6.5%)
37

38. TARIFF ELIMINATION AGRICULTURAL GOODS
• 94% agricultural tariffs eliminated immediately subject to notable
exclusions for poultry and eggs
• EU Exemptions:
– No duty reductions or additional access for chicken, turkey, eggs, egg products
– TRQ for Canadian beef, veal pork, canned sweetcorn
• Canadian Exemptions:
– No duty reductions or additional access for chicken, turkey, eggs, egg products
– Additional Canadian quota for cheese, and certain dairy ingredients
• Quid pro quo for additional access for Canadian beef
• TRQs administered by Global Affairs
• Good idea to apply for additional quota now if haven't already
38

39. RULES OF ORIGIN
• What does it mean to “originate”?
• Product is wholly obtained within meaning of Annex 4
• A product that is not wholly obtained in the territory
originates if it meets the product specific rule of origin in
Annex 5
• Tariff shift and regional content requirements
– Not the same as NAFTA
• Process specific requirements
• Net weight requirements
39

40. RULES OF ORIGIN APPAREL
EXAMPLES
• Rules are process driven
• 62.01: Men's or boys' overcoats, car-coats, capes, cloaks, anoraks
(including ski-jackets), wind-cheaters, wind-jackets and similar articles,
other than those of heading no. 62.03
• 62.05: Men's or boys' shirts
• Product specific rule for sufficient production for 62.01 and 62.05:
– Weaving accompanied by making-up (including cutting); or
– Making-up preceded by printing, accompanied by at least two preparatory or finishing
operations (such as scouring, bleaching, mercerising, heat setting, raising, calendering,
shrink resistance processing, permanent finishing, decatising, impregnating, mending
and burling), provided that the value of the unprinted fabric used does not exceed 47.5
per cent of the transaction value or ex-works price of the product.
40

41. RULES OF ORIGIN APPAREL
EXAMPLES
• 62.06: Women's or girls' blouses, shirts and shirt-blouses
• 62.11: Track suits, ski suits and swimwear; other garments (women's or
girls‘ clothing)
• Product specific rule for sufficient production for 62.06 and 62.11:
– Weaving accompanied by making-up (including cutting); or
– Production from unembroidered fabric, provided that the value of the unembroidered
fabric used does not exceed 40 per cent of the transaction value or ex-works price of the
product.
41

42. TARIFF RATE QUOTAS
• Import mechanism whereby a set quantity of a specific
product may be imported at a low or zero rate of duty
• Some TRQs are transitional, others are permanent
• Agriculture and Food Examples (in metric tonnes)
– Canada
• Cheese (Year 1: 2,667; Year 6 and beyond: 16,000)
• Wheat (Year 1 to 7: 100,000)
– EU
• Beef (Year 1: 5,140; Year 6 and beyond: 30,840)
• Pork (Year 1: 12,500; Year 6 and beyond: 75,000)
42

43. ORIGIN QUOTAS
• What are they?
– For products with a higher proportion of imported inputs
• Expressed as volumes classified by product category
• Certain goods will qualify for relaxed origin quotas provided
“sufficient production”
– High-sugar products
– Chocolate and confectionary
– Certain Processed Goods
– Pet Food
– Automobiles
– Fish and seafood products
– Textiles and apparel – (both ways)
43

44. ORIGIN QUOTAS
• Agricultural Products – articles containing high sugar (Table A.1 of Annex 5 of the Protocol on
rules of origin and origin procedures)
• Agricultural Products – Sugar Confectionery and Chocolate Preparations (Table A.2 of Annex
5 of the Protocol on rules of origin and origin procedures)
• Agricultural Products – Processed Foods (Table A.3 of Annex 5 of the Protocol on rules of
origin and origin procedures)
• Agricultural Products – Dog and Cat Food (Table A.4 of Annex 5 of the Protocol on rules of
origin and origin procedures)
• Fish and Seafood (Table B.1 of Annex 5 of the Protocol on rules of origin and origin
procedures)
• Textiles (Table C.1 of Annex 5 of the Protocol on rules of origin and origin procedures)
• Apparel (Table C.2 of Annex 5 of the Protocol on rules of origin and origin procedures)
• Vehicles (Table D.1 of Annex 5 of the Protocol on rules of origin and origin procedures)
44

45. TEXTILES AND APPAREL
ORIGIN QUOTAS (CANADA/EU)
• Limited, reciprocal origin quotas for textiles and apparel
• Tables C.1, C.2, C.3 and C.4 of Annex 5 of the Protocol set out
the origin quotas
• Origin quotas for textiles and apparel will be increased as
needed
• Canada into the EU (in metric tonnes)
– Men’s coats: 10,000; Women’s coats: 17,000
– T-shirts: 181,000 to 342,000
• EU into Canada (in metric tonnes)
– Women’s coats: 15,000
– T-shirts: 722,000
45

46. ADDITIONAL ORIGIN QUOTAS
(CANADA INTO THE EU ONLY)
• Confectionary (in metric tonnes)
– Sugar confectionary (without cocoa): 10,000
– Cocoa: 30,000
– Coffee-/Tea-based: 30,000
– Chocolate: 10,000
– Pastries/Certain Cereals: 35,000
• Vehicles
– 100,000 units
46

47. TECHNICAL BARRIERS TO TRADE
• Framework for acceptance of each parties technical
regulations as equivalent to their own
– need only meet one set of requirements for goods sold in both
markets
• Recognized Canadian and EU testing and certification bodies
to accept each other’s results and certifications
– need only go through one testing/certification procedure to be
accepted in both markets
47

48. GOVERNMENT PROCUREMENT
• Generally covers all goods and services with enumerated
exceptions
• EU procurement market is estimated to be over $3 trillion
annually
• Coverage much broader than NAFTA and in fact
unprecedented
– reaches into sub-federal procurement areas
• Double edge sword
– Canadian companies have enhanced access to EU procurement
opportunities but will also face enhanced competition in the
previously protected sub federal market in Canada
48

49. GOVERNMENT PROCUREMENT:
OVERVIEW
• Covered Entities
• Threshold Values
• Procurement Rules
• Review Mechanisms
• Best Practices
49

50. COVERED ENTITIES
• Devil in Detail – lots of exclusions and
inclusions – in unless out
• Canada
– Federal and Sub-federal
– “MASH” Sector
– 75-80% of all procurement by Utilities
• EU
– Federal and Nation States
50

51. 51
MARKET ACCESS SCHEDULE OF CANADA
Entities Goods Services Construction Services
Annex 19-1 (Central
Government Entities)
130,000 SDR*
($200,900)**
130,000 SDR
($200,900)
5M SDR
($7.7M)
Annex 19-2 (Sub-Central
Government Entities)
Including MASH
200,000 SDR
($309,100)
200,000 SDR
($309,100)
5M SDR
($7.7M)
Annex 19-3 (Other
Government Entities)
Section A (Arms-Length
Entities and Crown
Corporations)
355,000 SDR
($548,700)
355,000 SDR
($548,700)
5M SDR
($7.7M)
Section B (Infrastructure
and Utilities)
400,000 SDR
($618,200)
400,000 SDR
($618,200)
5M SDR
($7.7M)
*Special Drawing Rights: an international type of monetary reserve currency, created by the IMF.
**Canadian

52. 52
MARKET ACCESS SCHEDULE OF THE EU
Entities Goods Services Construction Services
Annex 19-1 (Central Government Entities) 130,000 SDR
($200,900)
130,000 SDR
($200,900)
5M SDR
($7.7M)
Annex 19-2 (Sub-Central Government Entities)
Section A (Regional or local contracting authorities)
200,000 SDR
($309,100)
200,000 SDR
($309,100)
5M SDR
($7.7M)
Section B Contracting authorities which are public bodies
governed by the EU Procurement Directive)
For hospitals, schools, universities, and entities providing
social services (housing, social insurance, day care)
200,000 SDR
($309,100)
200,000 SDR
($309,100)
5M SDR
($7.7M)
For other 355,000 SDR
($548,700)
355,000 SDR
($548,700)
5M SDR
($7.7M)
Annex 19-3 (Utilities) 400,000 SDR
($618,200)
400,000 SDR
($618,200)
5M SDR
($7.7M)

53. PROCUREMENT RULES
• Based on WTO Revised GPA
• Non-discrimination
• Tendering Procedure Rules
• Substantive Rules
53

54. REVIEW PROCEDURES
• Each Party to have a bid review mechanism
• For Canada federal - CITT
• Time limits
• Interlocutory Powers – stop procurement
orders
• Remedies
54

55. BEST PRACTICES
• Identify the applicable Agreement and
understand the rules
• Understand your remedies
• Promote in EU
– Take advantage of new opportunities
• But protect your interests at home
55

56. TRADE IN SERVICES
• Trade in Services are affected by a number of
chapters, including:
– Services (chapter 9)
– Temporary entry (chapter 10)
– Mutual recognition of professional qualifications
(chapter 11)
– Domestic regulations (chapter 12)
– Financial Services (chapter 13)
– Telecommunications (chapter 15)
56

57. TRADE IN SERVICES
• Big 3: National Treatment, Most Favoured Nation
Treatment, Market Access
• The aim is to facilitate business
• Covers services provided remotely (from Canada or the
EU) and a commercial presence
– Does not include services supplied by a person of the other
Party
57

58. TRADE IN SERVICES:
COMMITMENTS
• Temporary entry
• Domestic rules
• Mutual recognition of professional qualifications
• Exclusions: all sectors included unless explicitly
reserved or excluded
– EU: Government Services, Audio visual, Air transport
– Canada: Government Services, Cultural Industry, Air
transport
58

59. LABOUR MOBILITY
• Free Movement?
• Aimed to promote business agendas
• Designed to facilitate temporary entry and stay of
– key personnel
– contractual service suppliers
– independent professionals
– short-term business visitors
• Business visitors do not require a work permit
• Does not prevent Canada from applying differential visa
requirements between EU countries
59

60. CONTRACTUAL SERVICES SUPPLIERS (CSS) &
INDEPENDENT PROFESSIONALS (IP)
• Must be engaged in supply of a service on temporary basis for
contract not exceeding 12 months
• Must have been an employee with same enterprise at least 1
year prior to application (CSS only)
• Must have 3 (CSS) / 6 (IP) years of professional experience
• Must possess proper educational and professional
qualifications
• Must not receive remuneration during their stay from anyone
besides employing enterprise (CSS only)
60

61. HOW LONG CAN THEY STAY?
• Permissible length of stay for key personnel:
– Intra-corporate transferees (specialists and senior personnel):
lesser of 3 years or length of contract, with possible 18 month
extension
– Intra-corporate transferees (graduate trainees): lesser of 1 year
or length of contract
– Investors: 1 year, with possible unlimited extension
– Business visitors for investment purposes: 90 days within any 6
month period
61

62. PROFESSIONAL QUALIFICATIONS
• Submissions are encouraged from
professional bodies or relevant authorities
towards establishing joint MRAs
• National Treatment
62

63. INVESTMENT PROTECTION AND DISPUTE
SETTLEMENT
• Investment Protection - ISDS
• Investment Arbitration Court System
• Increased Investment Review Threshold
• Dispute settlement
– ISDS
– State-to-State
63

64. CONCLUSIONS
• Fluid
– NAFTA/CETA
• Monitor both
• Understand Agreement and where it fits in
spaghetti bowl
• Understand where opportunities lie
• Protect and promote your interests
– At home and abroad
64

65. QUESTIONS AND DISCUSSIONS
65
Brenda Swick
bswick@dickinsonwright.com
416-594-4052
Daniel Ujczo
dujczo@dickinsonwright.com
614-744-2579
Michael Weinszok
mweinczok@dickinsonwright.com
416-777-4026
Dylan Augruso
daugruso@dickinsonwright.com
416-777-2406
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