Long-awaited Ceta free trade agreement will be good news for the chemical industry in both regions 

A long-delayed free trade agreement was signed by the EU and Canada on 30 October, despite the drama of Belgium’s Wallonia region blocking the deal at the last minute. The chemical industry on both sides of the Atlantic is celebrating the development as a major victory. 

The European Chemical Industry Council (Cefic) had called for a final effort to get the Comprehensive Economic and Trade Agreement (Ceta) signed, pointing out that China has now replaced Europe as the dominant player in global chemicals production and now accounts for almost 40% of world chemicals sales. Ceta removes 98% of tariffs that currently hinder trade between the EU and Canada, and it is expected to increase bilateral trade by €12 billion (£10.8 billion) per year, and to generate growth and new jobs in both regions.

Cefic had argued that the costs to EU companies to engage with their Canadian counterparts were higher than they need to be. Canada’s trade in chemicals with the EU amounted to €2.5 billion in 2015, with an annual trade surplus of almost €1 billion for the EU. Cefic said small and medium sized chemical companies on both sides would benefit from the immediate elimination of chemical tariffs.

‘This is a good direction to be going,’ agrees David Podruzny, vice president of business and economics at the Chemistry Industry Association of Canada. He says it will translate to more predictable trade at a lower cost to chemical companies, and less interference by governments in trade.

Ditching tariffs

Under Ceta, tariffs on the chemical industry will fall from 5.5% for organic chemicals and 6.5% for plastics to virtually nothing, Podruzny explains. ‘Those will disappear as soon as the agreement comes into force,’ he says, noting that there will be no phase-in period.

Utz Tillmann, director-general of the German chemical industry association the VCI, said Ceta not only offers the German and European chemical industry new opportunities for market access in Canada, it also makes raw material imports cheaper. ‘Overall, the agreement brings new rules for the shaping of globalisation,’ Tillmann said. ‘This will set a precedent for future agreements.’

The passage of Ceta is considered a stepping stone for its much larger sister trade deal between the US and EU, known as the Transatlantic Trade and Investment Treaty (TTIP). Opponents of both trade agreements have argued that they could gut environment and chemical safety regulations, and could allow foreign investors to challenge government action that might harm profitability.

Still years away

However, people familiar with the deal point out that a provincial ratification process will be needed before Ceta can come into force. The agreement will require individual ratification in all European jurisdictions, and that could take up to two years, Podruzny estimates. Therefore, he says, there is a movement afoot to advance certain portions of Ceta more rapidly.

Ceta took seven years to negotiate, with the deal almost falling apart in the final stretch. Canadian prime minister Justin Trudeau had to cancel a scheduled trip to sign the pact in Brussels on 27 October, after Wallonia blcoked the deal.

Belgium cannot approve international pacts without the sign-off of all of its regions — including Wallonia. But Wallonia withheld approval over concerns that Ceta could give too much power to multinational corporations, and that it might require stronger language to protect environmental and other standards. However, negotiations proceeded and Wallonia eventually relented.

Some opponents of Ceta, such as the Center for International Environmental Law (Ciel), a US-based environmental group, suggest that the deal might allow undue Canadian influence on EU environmental regulations like Reach – the EU’s flagship chemicals policy. Ciel’s president and chief executive Carroll Muffett praised Wallonia’s minister–president Paul Magnette for trying to prevent Ceta from being approved. He noted that Canada had raised concerns over the EU’s Reach regulations before the World Trade Organization more than 20 times between March 2003 and June 2011.

Muffett added that Canada has ‘pointedly criticised’ Reach’s precautionary, hazard-based approach, which places a greater responsibility on industry to investigate and disclose the potentially harmful effects of its products.