Understanding the controversial EU-Canada trade deal ahead of crucial Senate vote

Five years later, here is the Comprehensive Economic and Trade Agreement (CETA). The controversial trade agreement between the European Union (EU) and Canada is back in the public debate, driven by double news: while, like every five years, international trade issues enter the campaign European elections, the French Senate must decide on Thursday March 21 on the ratification of the treaty. In the event of a negative vote, the future of the agreement would be seriously compromised.

What is CETA?

The Comprehensive Economic and Trade Agreement (CETA), better known by its English acronym CETA, is a free trade treaty between the EU and Canada. This dry text of 2,344 pages is difficult to access for non-specialists. It essentially provides for three types of measures:

• a reduction in customs duties, hitherto applied to certain products and services, to stimulate their circulation between the two blocs;
• a reduction in regulations that indirectly slow down trade (known as “non-tariff barriers”), through a gradual convergence of standards and an elimination of protectionist measures;
• a special court accessible to European companies that invest in Canada (and vice versa), supposed to encourage them to invest on both sides of the Atlantic.

Why are we talking about it again now?

CETA, concluded in 2014, went through several years of turbulence before finally receiving the agreement of heads of state and MEPs in 2017. Since then, 95% of its measures have entered into force, starting with the reduction of tariffs.

However, the story is not over. As part of the clauses of the agreement encroach on the competences of the Member States, their national parliaments must be consulted before its entry into definitive and complete application. However, seven years later, alone seventeen Parliaments out of twenty-seven gave their agreement. For the other ten, the governments dragged out the process, probably for fear of being refused by their parliamentarians.

This is the case of France. After having CETA narrowly ratified by the National Assembly in the summer of 2019 – opening an unprecedented divide in the presidential majority – the government has been reluctant for five years to send the text back to the Senate, where it risks failure.

This meant counting without the communist senators, who took advantage of their right of initiative to impose the examination of this question on March 21, during their “parliamentary niche”. A way of reminding the government of its promise of 2021, when the Minister Delegate responsible for foreign trade and attractiveness, Franck Riester, had assured that “the Senate will be[it] brought to pronounce”.

What is at stake in the vote?

If a majority of senators reject CETA on March 21, the treaty will be returned to deputies for a new vote. Unlike in 2019, the current balances of the National Assembly could lead to a negative vote, definitively burying the ratification on the French side. The European Commission would then suspend the provisional application of the agreement throughout Europe – probably signaling its end.

Conversely, if the Senate decides in favor of the treaty on March 21, it will be officially ratified by France. It remains to obtain the agreement of the nine remaining member states, for which ratification is far from being achieved: thus, in Italy, the far-right government clearly opposes the treatywhile in Cyprus, MPs have already rejected it for the first time in 2020.

If the EU-Canada agreement successfully passes this parliamentary obstacle course, it would then enter fully and definitively into force. This would allow the activation of the last unapplied chapters of CETA, in particular the much criticized company-State arbitration mechanism.

Why is the deal controversial?

For ten years, CETA has been the subject of heated debates between its defenders, who bet on its economic benefits, and its opponents, who brandish the risks it poses to European agriculture, health and environment.

This is the main argument of pro-CETA: the agreement can boost transatlantic trade, by allowing European companies to conquer new markets and create jobs.

THE first assessments actually show a significant increase in trade between the two blocs since 2017, of 37% (+ 51% for goods and + 10% for services). But this dynamic is largely explained by inflation, according to a recent report from the Veblen Institute, a leading environmental NGO hostile to CETA, which showed that in volume terms, the increase in trade in goods was much more limited (+ 9%).

The European Commission also welcomes a 12% increase in jobs “supported by EU exports to Canada”. However, as the Veblen Institute report pointed out, this figure is very unreliable.

Cattle breeders have always been among the main opponents of CETA. They feared that the reduction in customs duties on the importation of Canadian meat would create unfair competition for them.

But for the moment, the announced “surge” has not taken place. Very few Canadian breeders have decided to invest to export to the European market, which has significantly different standards. In 2023, they only exported 1,400 tonnes of beef to Europe, or barely 2% of the volume allowed by CETA. For France, the figures are insignificant: only 29 tonnes of Canadian beef were imported in 2023. But some fear that the trend will be reversed in the future, particularly if the Asian market dries up: Canadians could then find an interest in invest in export sectors to Europe.

Conversely, European livestock farming has already benefited from CETA, by significantly increasing its beef exports to Canada, from 1,700 to 14,000 tonnes in seven years. Just like European cheese producers, who are making full use of their new export quota of 19 million tonnes (or a little more than 1% of their global exports).

As early as 2017, a commission of experts alerted the French government to the risk that CETA would facilitate the importation of Canadian agricultural products that do not meet European health and environmental standards. Indeed, the agreement does not include any “mirror clause” which requires Canadian exporters to align with European standards: they therefore still have the possibility of feeding their cattle with certain animal meals or administering antibiotics to them.

If certain treatments are prohibited (growth hormones, ractopamine, genetically modified organisms), an audit carried out by the European Commission in 2022, which pointed to “gaps” in the supervision of the hormone-free beef sector, has reactivated doubt about the seriousness of Canadian veterinary controls.

In 2017, experts commissioned by the French government estimated that the impact of CETA on the environment would be slightly unfavorable, due to the increase in greenhouse gas emissions caused by increased trade, and the absence of strong climate commitments in the agreement to counterbalance it.

According to the Veblen Institutethis prediction came true, with an intensification of trade in polluting products, such as fertilizers or oil from tar sands.

• Arbitration courts

If it comes into full force, CETA will establish a special jurisdiction to deal with complaints from Canadian companies who consider themselves wronged by the decisions of their host state in the EU, and vice versa. This arbitration system, the Investment Court System (ICS), was designed to protect multinationals against expropriation. But it could, according to its detractors, be used by companies to challenge health and environmental legislation unfavorable to their interests.

To prevent this risk, the EU has largely reformed the initial mechanism and tried to clarify certain ambiguous terms of the treaty. However, the ICS still poses problems of neutrality and independence. Environmental associations consider that it poses too great a threat to the actions of States for the climate, failing to include a real “climate veto”, which would prevent litigation on environmental issues.