Doing business in the European Union

The European Union (EU) is made up of 28 countries¹ with a combined population of about half a billion people. This makes it one of the largest markets on earth. Not only that, it’s the world’s second-biggest economy after the United States, with a GDP of around US$17 trillion in 2017.

Canada has maintained a vibrant economic relationship with the EU for many years, but CETA will have far-reaching effects of its own. Even before the agreement came into force, Canada was exporting about $40 billion² in goods and $18 billion in services to the EU every year. At the same time, EU nations were providing us with around $61 billion worth of goods and $24 billion worth of services annually. CETA is Canada’s biggest free trade deal since NAFTA and will create enormous opportunities for both Canada and the EU’s member countries

If your company is already operating in the EU, CETA may help you expand your business there. If you haven’t yet diversified into the EU but would like to do so, CETA can make it considerably easier for you to enter the European market.

The agreement’s major features include the following:

1.2.1 – Tariff provisions

When CETA came into effect in 2017, it immediately eliminated 98.4% of tariffs on all non-agricultural Canadian goods entering the EU. Within seven years, 98.8% of these goods will be tariff-free. In response, Canada will remove 98% of its tariffs on the same goods coming from the EU.

1.2.2 – Transition periods

There are transition periods of three to seven years for ships, automotive products and certain agricultural goods in Canada, while poultry and eggs are excluded. Canadian import quotas on EU dairy products will rise but the tariffs on such imports, above those quotas, will remain. For details on the goods affected, and how the tariff reductions or quotas will work, refer to the CETA Chapter Summaries on the Global Affairs Canada web site.

1.2.3 – Rules of origin

CETA provides Canadian exporters with clear rules of origin that take into consideration Canada’s supply chains. This will help companies determine which goods are considered “made in Canada” and thus gain preferential tariff treatment when entering the EU.

1.2.4 – Regulatory and conformity cooperation

CETA’s provisions will help reduce the differences in regulatory approaches between Canada and the EU. This will ultimately reduce non-tariff trade barriers on both sides. On the standards side, CETA’s conformity assessment protocol allows Canadian companies in several sectors to have EU-targeted products tested and certified in Canada. This will reduce conformity assessment costs and will benefit small and medium-sized enterprises (SMEs) in particular.

1.2.5 – Services and labour mobility

In the services sector, all parties providing services in the EU and Canada will be treated equally. There will be no import quotas on Canadian services or service providers in the EU, and the reverse will also be the case. In addition, Canadian service companies will not have to maintain a representative office in the EU, or be an EU resident, to supply services to EU customers. CETA’s temporary entry provisions will make it easier for professionals and businesspeople, such as engineers and senior managers, to work in the market. Business visitors without work permits will be allowed temporary entry for purposes of investment.

1.2.6 – Government procurement

Canadian companies will be able to bid on EU government procurement contracts—a multi-trillion-dollar market. This applies to all levels of the EU government, including national, regional and local governments, and a large array of entities in the utilities sector. Europeans will likewise have access to Canadian government procurement contracts. However, CETA places some important restrictions on EU access in this area. These include exceptions for Canadian cultural industries, Aboriginal businesses, defence and R&D, and for services in the finance, recreation, sport, education and social and health-care sectors.

1.2.7 – Access to inputs and expertise

Canadian companies will have access to EU materials, technology, intermediate inputs and skilled labour. Our exporters can take advantage of these resources to make their supply chains more competitive.

1.2.8 – Investment protection

On the investment side, Canadian investors will be treated the same way as investors from within the EU. This should encourage investment by Canadian firms that want to join EU supply chains.