We have previously reported on the progress of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) on this blog (see here and here). While the implications and impact of CETA on both business and M&A activity in Canada remain uncertain, after protracted negotiations and a near decade-long process, CETA is slated to come into force later this week, on September 21, 2017.
Background on CETA
CETA is a bilateral economic relationship that will impact most sectors and thereby affect both the Canadian and EU economies. In particular, CETA is a free trade agreement that eliminates or reduces trade barriers that cover most sectors and aspects of Canada-EU trade. Prior to the coming into force of CETA, approximately 25% of EU tariff lines on Canadian goods were duty-free. After full implementation, 99% of EU tariff lines on Canadian goods will be duty-free.
In the news
The Minister of International Trade recently released the following statement:
Canada is a trading nation, and Canadians know that our prosperity is linked to our connections with the global economy. The Greater Toronto Area is a region full of success stories about companies of all sizes and their ability to tap into the potential of exporting. Europe, Latin America and the Asia-Pacific provide new opportunities to expand our trade relationships and benefit Canadian workers and their families.
Implications for the Canadian economy
The effect of implementing CETA may have far-reaching, global effects. Some highlights include:
- Opening the door to unprecedented access for the exportation of Canadian goods and services to the EU market;
- Creation of new market opportunities through the leveraging of financial services and information systems and services;
- Enhancing labour mobility;
- Fewer regulatory hurdles which will streamline processing and movement of goods and services;
- Increased inbound investment through lifting the government threshold of review of foreign investment by EU countries from $600 million to $1.5 billion thereby reducing hurdles for European investors to acquire Canadian companies; and
- Opportunities for accelerated growth through acquisition and cross-border market activity.
The final text of CETA the can be found here.
Time will tell what knock-on effects the implementation of CETA will have on M&A activity in Canada, but what is certain is that after this week, Canadian business will have unprecedented preferential access to the world’s two largest economies – the US and the EU.
The author would like to thank Peter Valente, Articling Student, for his assistance in preparing this legal update.
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