Not only is the European Union (EU) the second-largest economy in the world, it also contains a population of roughly 450 million consumers. An economy of this magnitude presents British Columbia (B.C.) companies with immense international business opportunities, but did you know that there are ways to make your B.C. business even more competitive when engaging with the European market?
The Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU allows your B.C. business to gain preferential market access to the European market. This agreement gives B.C. businesses a competitive edge over international competition from countries that do not have a free trade agreement (FTA) with the EU. To understand how your business can benefit from this agreement, lets first understand what CETA is.
Provisionally brought into force in September of 2017, CETA is an FTA between Canada and the EU. CETA covers an array of economic areas and benefits a wide variety of sectors. It allows Canadian and B.C. businesses to be more competitive in the European market by covering trade in goods and services, reducing tariff and non-tariff trade barriers, facilitating access to government procurement opportunities, investment, and labour mobility – all of which will be covered in this article.
CETA sounds great – but why should B.C. businesses consider exporting or investing specifically in Europe?
The EU is one of Canada’s largest trading partners, and the world’s largest importer of services and second-largest importer of goods. To put this into perspective, the EU’s annual imports account for a value higher than Canada’s Gross Domestic Product (GDP). Additionally, the EU has more Fortune 500 enterprises than anywhere in the world.
The magnitude of the EU’s market provides an abundance of demand for B.C. exports, and CETA only enhances these opportunities with preferential access to European markets. The EU is one of the best international trade opportunities in the entire world – but what truly are CETA’s benefits, and how can B.C. businesses get a piece of the action?
Now that we have established the various business opportunities in the EU, let’s review some of CETA’s key benefits.
Trade barrier reductions: CETA reduces barriers to trade, such as tariffs, regulatory measures, import quotas, etc. This makes B.C. products more accessible to EU importers, allowing for an array of export opportunities.
Transparency: CETA includes various provisions on maintaining transparent business practices when engaging in Canadian-EU trade. These provisions protect your company when engaging in international trade, not to mention it creates a stable business environment for all participating entities.
Market presence and client access: CETA makes it easier for B.C. businesses to engage with EU markets. For example, CETA’s mobility provisions grant the ability to travel to the EU to consult with investors and service providers, to do a traineeship, to provide professional services, and so on. This allows B.C. businesses to reach more clients and gain a heightened market presence within Europe.
Government Procurement: CETA gives B.C. businesses an equal opportunity to bid on government procurement contracts within the EU alongside European businesses. CETA’s procurement opportunities are unique; they provide access to procurement at all levels of government in the EU, from the EU government to national, territorial, and municipal levels, opening potential business estimated at $3.3 trillion annually.
CETA provides opportunities to B.C. businesses of all sizes, including small and medium-sized enterprises (SME), which account for 90% of all Canadian private-sector jobs.
CETA also creates a level-playing field for businesses of all sizes. For example, CETA provides simplified processes for exporting goods through European customs and ensures that technical regulations and standards are applied equally to products and goods originating in both Canada and the EU. Since its preliminary entry into force in 2017, CETA had reduced or eliminated tariffs on 98% of Canadian exports, creating a more accessible market for smaller Canadian businesses.
These advancements help SMEs take full advantage of international opportunities. If you operate an SME in B.C. and want to learn how CETA can benefit your business, check out this information page that provides an overview of how different sectors can benefit from CETA’s offerings.
As you may be aware, the United Kingdom officially withdrew from the EU in January of 2020. The U.K.’s vote to leave the EU is commonly known as Brexit (short-form of “British-exit”). The U.K.’s decision to leave the EU impacted the nation’s ability to participate in CETA, leaving many B.C. businesses questioning whether or not they would still gain preferential access to this established market.
As it turns out, Canada and the U.K. established the Canada-United Kingdom Trade Continuity Agreement (Canada-UK TCA) which was brought into force in April of 2021. This agreement allows B.C. businesses to maintain preferential access to the U.K. market, providing a stable international trading environment for all participants. The Canada-UK TCA eliminates tariffs on 98% of Canadian exports to the U.K., allowing B.C. businesses to easily sustain relationships with U.K. counterparts. To learn more about Brexit and its impact on Canadian businesses, check out this information page.
The benefits associated with CETA’s preferential access to EU markets are not automatic – they must be claimed.
The first step in claiming preferential treatment is to understand how your products will be classified. Products are classified using Harmonized System (HS) codes. Canada Tariff Finder serves as a good starting point to understand how your goods are classified; however, to make sure your products are accurately classified you may wish to seek additional legal advice, consult a customs broker or apply for an advance ruling.
To qualify for preferential tariff treatment, your products must also meet the rules of origin. Rules of origin specify the amount of production done in Canada/EU or the value of non-originating materials that can be tolerated for your product to be considered “originating”. The rules of origin for CETA are outlined through the Canadian Trade Commissioner’s office.
Exporters are required to provide an origin declaration to the importer of their products. An origin declaration is a document that demonstrates the product has met the rules of origin requirements. There are certain documents that can be used to prove the origin of a product, such as documentation related to production processes. To learn more about origin declarations and supporting documents under CETA, check out article 25 of CETA’s origin procedures.
To learn more about this entire process, check out this blog post; a step-by-step guide to claiming preferential tariff treatment.
If you have questions regarding CETA, visit this FAQ page. To learn more about CETA’s benefits to B.C. businesses, view this recorded webinar for helpful tips on entering the EU under CETA. If you have questions, contact us here, and learn more about Canada’s free trade agreements by visiting our trade resources page.
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