Canada-European Union Comprehensive Economic and Trade Agreement (CETA) Committee on Trade - Joint report

April 22 and 23, 2024

1. Adoption of the agenda and introductions

Canada opened the meeting noting that CETA has been positive for both Canada and the EU. In 2023, bilateral trade in goods reached $126 billion CAD (or EUR 76 billion). This represents a 65% increase over the pre-CETA level of trade in 2016. Canada also highlighted that its final tariff cut under the Agreement occurred on January 1, 2024. The EU noted the outcomes of the CETA Joint Committee meeting in February 2024 which followed up on the EU-Canada Summit in Fall 2023. At the Joint Committee meeting, Executive Vice-President and European Commissioner for Trade Dombrovskis and Minister Ng tasked CETA Committees to look forward in their work.

2. Technical barriers to trade

2.1. EU’s Renewable Energy Directive (RED) (Canada item)

Canada noted its concern that prohibitions on biomass sourcing (no-go areas), which were previously limited to agricultural biomass, will now be extended to forest biomass, including biomass that is sustainably sourced from countries like Canada with strict forest laws. Canada also noted that this revision may negatively affect Canada’s ability to export sustainably sourced pellets to the EU in an economically viable way. Canada requested an update on the EU’s implementation process and asked if guidance would be provided to EU Member States to ensure consistency in application throughout the EU.

The EU acknowledged the difficulties that Canada will be facing with the RED revision but confirmed that the legal text has been adopted.  The Commission is meeting with EU Member States to ensure that national legislation and implementation are ready by 21 May 2025. This will help ensure consistencies across Member States.

2.2. Canada’s proposed Regulations amending Certain Regulations Concerning Food Additives and Compositional Standards (EU item)

The EU welcomed Canada’s openness for comments and questions on the proposed Regulations amending Certain Regulations Concerning Food Additives and Compositional Standards, Microbiological Criteria and Methods of Analysis for Food, regarding listing of colouring additives in the definition of liqueurs. The EU noted that the proposed changes risk impacting small and medium-sized enterprises (SMEs) and increasing compliance costs. Where exactly the list of additives will be listed was also asked by the EU, along with further opportunities for the operators to provide feedback.

Canada responded that the Canadian Food Inspection Agency and Health Canada are working on the regulatory process and will take into consideration comments the EU shared. It was noted that Health Canada plans to publish the regulations in the fall of 2024 and can provide follow ups as work progresses. Canada also noted that the list of additives will be incorporated by references. Canada also assured the EU about the transparent administrative processes that is in place which includes a consultation process with all stakeholders.

3. EU Regulation on deforestation-free products (EUDR) (Canada item)

Canada noted its serious concerns with this measure and its potential effect on trade, particularly the geo-location requirements and the definition of forest degradation. Overall, Canada is concerned that in the Canadian context, these and other EUDR measures are likely to have unnecessary trade impacts, even though products that originate in Canada are at low risk of contributing to deforestation and forest degradation.

The EU indicated that there will be a new edition of the Frequently Asked Questions document out soon that will address some of the questions around the EUDR definition of forest degradation. Canada and COM agreed to discuss further at technical level the issue of forest degradation.

4. Canada’s Select Luxury Items Tax (EU item)

The EU referred to the study it commissioned regarding the impacts of Canada’s luxury tax on EU exports, noting that the results confirmed its views that Canada’s luxury tax is de facto discriminatory on EU vehicles. The EU also shared that several of its auto makers raised the tax as they have seen up to a 60% reduction in orders of vehicles since it came into effect. The EU suggested that electric vehicles (EVs) be exempt from the tax.

Canada stated the tax was not designed to be discriminatory nor is it applied in a discriminatory way. Canada explained that the tax applies to all vehicles valued above a certain threshold irrespective of where those vehicles are produced, and that the tax addresses a public policy goal. With respect to the EU-commissioned study, Canada questioned some of the assumptions it used and the absence of certain vehicle segments that are important to the Canadian vehicle market.

While acknowledging the aim of the tax, the EU asserted that the tax disproportionately impacted vehicles made in the EU or in third countries by EU-based companies and noted the lower sales numbers. The EU also noted that the study was commissioned to an independent firm and it could not influence its outcomes.

Canada indicated that 2023 was the best year for vehicles imported from the EU both in terms of numbers of vehicles and the overall value. Canada also noted that with technological advances more and more EVs sold in Canada are available below the luxury tax threshold.

The EU concluded by noting its continued concern and that it will continue monitoring vehicle exports to Canada.

5. France’s eco-bonus for certain motor vehicles (Canada item)

Canada recognized that EV consumer incentives can help accelerate market penetration and reduce emissions, and that both Canada and the EU share a goal to end the sale of new emitting cars by 2035. Canada shared that it is in the process of increasing production of EVs and EV batteries. Canada stated that it is worried that the ecological bonus environmental score introduced by France could have a negative effect on trade and questioned the consistency with trade rules. Canada sought clarification on this policy as it could affect Canadian industries, notably steel and aluminum, but also battery manufacturing and EVs exports in the future. Canada noted that currently only EU vehicles apply for the eco-bonus and sought additional information on the design of the policy including how each category is scored.

The EU responded that France’s measure is to promote environmentally friendly vehicles throughout the life cycle. The EU recognized that green technology is often energy intensive. The EU shared that France’s eco-bonus includes EVs valued at 47,000 Euros and below, and the methodologies are based on scientific methodologies for the full life cycle for certain assessed categories. The French government has published a list of vehicles that can benefit from the eco-bonus. The EU also provided information on the process for vehicles to be included on the list.

6. Reports from committees

6.1. Report of the Agriculture Committee meeting (Canada and EU item)

Canada referred to the issues discussed at the most recent meeting of the Committee on Agriculture which was held on September 12, 2023. Canada noted that it raised the allocation of licencing of quotas for Canadian beef and pork exports, deforestation, and regulations on veterinary medicinal products and pesticides. Concerns on new country of origin labelling rules were raised, as well as Canada’s concerns with the EU’s proposed new legislation on animal welfare during the transport of live animals. Canada also shared its view that the CETA Agriculture Dialogue has been a successful information sharing venue and noted the success of workshops with the EU within the framework of the Dialogue on Sustainable Agriculture.

The EU raised continued concerns with Canada’s cheese TRQ administration and the question of full compliance with CETA objectives, particularly in relation to the reportedly high level of transfers and the possible associated costs for consumers., Canada expressed the view that its TRQ administration to be compliant with CETA. The EU welcomed news that the TRQ administration review that was paused a few years ago may soon be finalized and trusts that it will address its concerns. In response to Canada’s concerns about quota allocation for meat, the EU noted that the system reflects the reality of the shared competence of the EU and Member States in managing the system and noted that in its view the system was automatic and it will ensure that all requests are treated as expeditiously as possible. The EU endorsed Canada’s positive views of the CETA Agriculture Dialogue and the EU-Canada Dialogue on Sustainable Agriculture. The EU also raised the beef and pork audit and underlined the need to advance the completion of the EU’s recommendations and looks forward to receiving a follow up response from Canada.

6.2. Report of the Wines and Spirits Committee meeting (Canada and EU item)

Canada noted that the Wines and Spirits Committee had not met since the last Committee on Trade and Goods meeting but confirmed that they are scheduled to meet on May 15 and 16. Canada also shared that on April 4, the Parties signed a decision of the Joint Committee on the Agreement Between Canada and the European Community on Trade in Wines and Spirit Drinks, incorporated by reference into the CETA. The decision will amend a number of annexes of the agreement, including by adding new oenological practices and registered geographical indications. This development was highlighted as a good example of collaboration between the Parties. The EU noted that the Decision paved the way for the subsequent amendments and served as a positive example of introducing amendments to CETA.

6.3. Report of the Joint Sectoral Group on Pharmaceuticals (Canada and EU item)

On behalf of both Parties, the EU provided an update on the most recent meeting, held on December 6, 2023, at which the Parties discussed the extension of the scope of the Pharmaceutical Protocol.

6.3.1. Update on the process towards the amendment of the scope of the CETA Pharmaceutical Protocol to include active pharmaceutical ingredients

The Parties provided a brief update on the status of their work on a draft Joint Committee decision to amend the Protocol to include active pharmaceutical ingredients in its operational scope.

7. Work under the CETA Conformity Assessment Protocol (Canada and EU item): Assessment of the implementation of the CETA Conformity Assessment Protocol and future work (with detailed discussion under the next two items)

Canada noted that it was pleased that the process to recognize two new product categories under the Protocol has been completed. Parties noted their shared interest in expanding products in new technologies. The EU also noted that it continued to consider the request that Canada made last year to add three Annex product categories to the Protocol, noting the need for further assessments. The EU noted the ongoing challenge faced by EU Conformity Assessment Bodies to interact across the Canadian market and suggested the creation of a one-stop shop at the federal level in Canada. Canada welcomed the idea of a one-stop shop and proposed to discuss this further. Canada reiterated its offer to respond to any questions about Canada’s regulatory system from European Commission officials, or representatives from the EU’s accreditation and conformity assessment stakeholders and expressed its readiness for joint outreach activities.

8. Artificial intelligence (Canada and EU item)

8.1. Exchanges on regulatory developments including the EU Artificial Intelligence Act and Canada’s Artificial Intelligence and Data Act

The EU indicated that the adoption of its AI Act is going well, as the European Parliament has approved it, its Council plans to do so by May 21, and it will be published in the EU Official Journal in June. It highlighted that only a fraction of AI products deemed to be high risk would be subject to third party conformity assessment and that a level playing field would be provided for all suppliers.

Canada noted that it is making good progress on advancing the Artificial Intelligence and Data Act’s Parliamentary review and the responsible Committee is now undertaking a clause-by-clause review of the Act. It highlighted that, if the legislative process proceeds smoothly, the Act will then go to third reading and adoption by the House of Commons, followed by consideration and passage by the Senate.  It remarked that the development of implementing regulatory measures would follow.

8.2. Future work on conformity assessment of AI enabled products

Canada indicated it was pleased that under the workplan for the EU-Canada Digital Partnership, the Parties could start exploring opportunities and necessary steps that would be involved in reaching agreement on adding AI to the CETA Conformity Assessment Protocol. Canada stated it believes there would be great mutual economic benefits from ensuring both jurisdictions had access to MSME’s innovative AI products, from wherever they had been created. It proposed working level exploratory talks on the addition, followed by formal talks after the EU AI Act’s likely June publication in the EU Official Journal, and highlighted the value of links to the results of the Canada-EU Digital Partnership.

The EU noted that publication of the AI Act in the Official Journal would allow for a detailed discussion of how to mutually recognize conformity assessment, and that the Committee on Trade in Goods would need to greenlight the addition of AI to the Protocol before it was approved by the CETA Joint Committee. It noted that it would be several years before the AI Act becomes applicable and that it will be important not to get ahead of the process, especially given the complexity of the EU’s governance structures. However, it also emphasised that it would be good to have initial exchanges now, and that it was conducting a legal analysis of the way forward. The preliminary assessment is that it would be feasible to conduct the work under the CETA protocol whereas a separate Mutual Recognition Agreement would require a much heavier process.

Canada indicated it continues to seek the EU’s agreement that the EU AI Act’s implementing legislation will provide non-discriminatory access to regulatory sandboxes for third Parties. The EU responded that the sandboxes will support innovation and that Member States shall ensure that their competent authorities establish at least one AI regulatory sandbox at national level, which shall be operational by 24 months from the date of entry into force of this regulation.

8.3. Work on standards (including in the RCF)

Canada expressed its belief that there is mutual benefit in facilitating the ability to engage in international trade by reducing the number of unique one-off national standards. It noted it continues to encourage the EU to use ISO processes, like JTC 21, to develop international standards for the implementation of the AI Act with as few EU-specific deviations as possible. It noted it appreciates the collaborative work on AI the SCC and CEN-CENELEC are undertaking in the RCF and looks forward to seeing concrete outcomes from this work.

The EU responded that it believes interoperability is important, that it is active at the ISO and is open to working with Canada. It noted that, nonetheless, the standards used will need to reflect the AI Act’s requirements and must be completed by 2025.

9. Cybersecurity (Canada and EU item)

9.1. Exchanges on regulatory developments including EU Cyber Resilience Act and European Cybersecurity Certification Scheme on Common Criteria (EUCC)

9.2. Future work on mutual recognition/conformity assessment

European Cybersecurity Certification Scheme (EUCC)

On the new EUCC, Canada inquired about EU’s recognition of certificates issued under the Common Criteria Recognition Arrangement (CCRA) during and after the transition period and asked whether future MRA(s) with CCRA adherents would be negotiated on a bilateral or a plurilateral basis, and/or if the Commission or EU would be considering joining the CCRA. The EU answered that they are committed to finding a solution to ensure an orderly transition between the EUCC and the CCRA, including finding short-term solutions .  However, given that the Commission is in the exploratory phase, it is still considering various options on how this would be achieved, including short-term solutions, and in the long-term, bilateral and /or plurilateral mutual recognition agreements. The Commission could not yet respond on the future format of participation of the Commission or EU in the CCRA. 

EU Cyber Resilience Act (CRA)

Following-up on the workplan agreed under the Canada-EU Digital Partnership, Canada conveyed its appreciation for the Commission’s willingness to explore the mutual recognition of the results of conformity assessment for cybersecurity of products with digital elements . Canada indicated it will outline its legal framework for mutual recognition and identify the appropriate Canadian participants for future discussions. Canada suggested the use of the CETA Conformity Assessment Protocol to achieve mutual recognition. Canada inquired about the timeline for the publication of the CRA, a precondition to formally negotiate mutual recognition with third countries. 

In response, the EU provided an update on the CRA, and indicated that its publication in the EU Official Journal is expected for by the end of 2024. The EU confirmed that a 3-year transition period would follow, and noted it will also adopt bylaws and issue guidance for manufacturers. The EU confirmed that Article 34 as per the CRA text voted by the European Parliament in first reading provides for the possibility to conclude Mutual Recognition Agreements with third countries, noted its openness to explore opportunities for an MRA with Canada, and recognized that the Protocol was one of the possible options to achieve mutual recognition of conformity assessment results. 

The EU highlighted its draft request to European Standards Organisations to develop the required horizontal and vertical standards, a process that should take at least two years, noting it encourages to build on existing international standards. Canada encouraged the Commission to base the CRA’s requirements on international standards to the greatest extent possible, taking into consideration the sensitivity of small and medium-sized enterprises to regulatory burden. The EU replied positively, but also noted that existing standards may not cover all cybersecurity requirements. 

10. Transition to net zero emission economies (EU and Canada item)

10.1. Canada’s budget 2024 (Made-in-Canada plan) and the EU Green Deal Industrial Plan for the Net-Zero Age

Canada began the discussion by highlighting parts of the recently announced Budget 2024 focussed on Canada’s green transition. Budget 2024 built on a suite of tax credits announced in 2023 and introduced a new “Electric Vehicle Supply Chain Investment Tax Credit” which will provide 10% investment tax credit for manufacturers that choose Canada across three supply chain segments. This is on top of the 30% Clean Technology Manufacturing investment tax credit announced in last year’s Budget. None of Canada’s tax credits include local content requirements. Canada noted that design and implementation details will be included in the 2024 Fall Economic Statement.

The EU asked about the statement on reciprocity in Budget 2024 and how this may be implemented in practice. Canada noted that it was a general statement reflecting the fact that Canada would consider the implementation of reciprocal measures where other countries disadvantaged Canadian business. The EU shared an update on its Critical Mineral Act which will be published in the EU Official Journal in May. Benchmarks by 2030 include monitoring and supply chain readiness. Regarding critical minerals and raw materials, the EU now has 12 Strategic Partnerships. 

The EU provided an update on the Net Zero Industry Act and the provisional political agreement between the EU Parliament and Council which will allow it to move forward. This Act will help the EU with a simplified regulatory environment.  

10.2. Measures intended to deal with the risk of carbon leakage including carbon pricing and border adjustment measures (EU and Canada item)

The EU provided an update on the Carbon Border Adjustment Mechanism (CBAM), noting that it formally entered into its transitional phase on October 1, 2023, to the end of 2025. The CBAM will ensure that an equivalent carbon price is paid for domestic and for imported products for the most carbon intensive goods imported into the EU.  The CBAM applies to six sectors: cement, iron and steel, aluminum, fertilizer, electricity and hydrogen. In 2025 the Commission will reflect on a possible extension of the scope to other sectors covered by the EU ETS and considered to be at risk of carbon leakage. During the transitional phase, EU importers of these goods should report on the greenhouse gas emissions embedded in their imported goods on a quarterly basis. It is only from Jan 2026 that CBAM certificates will have to be bought and surrendered based on the embedded emissions of the imported products. The EU noted that Canada’s exposure to CBAM is quite limited and mainly in the steel and aluminium sectors as was reflected in the first CBAM report. Efforts to decarbonize will be reflected into lower CBAM adjustments and carbon prices effectively paid domestically will be deducted from the CBAM obligation. The EU has convened a CBAM expert group in which Canada has representation as observer.

Canada had two follow up questions regarding the reactions from its stakeholders and its plans for use of data. The EU reinforced that it is working to minimise the administrative burden for importers, including recently extending the deadline for the first CBAM reporting period, and allowing default values to be used for the first three CBAM reporting periods (with 95% of imports opting for this approach in the first reporting period). On data, the EU noted that in the regulation foresees publication of data on embedded emission for each of the CBAM sectors but they do not intend to provide a breakdown by trading partners. 

Canada indicated that it continues to not have a border carbon adjustment mechanism, citing several reasons including trade integration with the United States, which does not have a national carbon price, and the high export intensity of Canada’s emissions intensive industries.

10.3. Exchange on steel and aluminium supply chains (Canada and EU item)

Canada and the EU had an exchange on what each is doing with regards to steel and aluminium supply chains. The EU provided an update on its negotiations with the United States on the Global Arrangement on Sustainable Steel and Aluminum and explained that it saw this as a process to be opened to partners notably Canada in future which it had also proposed to the United States.

Canada elaborated on the February announcement of Canada’s Steel Import Monitoring Program. As of November 5, 2024, steel importers will be required to report the country where raw steel was first melted and poured, known as the “country of melt and pour” (COM), to the Canada Border Services Agency when completing their customs declarations for steel imports under the Program. This initiative aligns with Canada’s commitment to increase transparency in the domestic supply chain for steel imports and provide a more comprehensive picture of the origin of imported steel goods. Canada also advised that there will be public consultations on the proposed regulatory changes and noted that these consultations will occur soon. The EU asked how the data for country of melt and pour will be published and Canada responded that its intent is to publish data on the 抖淫视频 website in an aggregate fashion while protecting business proprietary information. Canada concluded that it is exploring a similar policy for the collection of country of smelt and cast for the Aluminium Import Monitoring Program.

Participants list

Canada:

Co-Chair: Executive Director, Tariffs and Goods Market Access Division, 抖淫视频
Co-Chair: Director, International Trade Policy Division, Department of Finance Canada
Health Product Compliance, Health Canada;
Technical Barriers to Trade Division, 抖淫视频;
Trade Agreements Secretariat, 抖淫视频;
Market Access Secretariat, Agriculture and Agri-Food Canada;
Non-Supply Managed Trade Controls, 抖淫视频;
and Mission of Canada to the European Union 

EU:

Co-Chair: European Commission, DG TRADE, Deputy Head of Unit D1
European Commission services: DG Trade (DG TRADE); DG Internal Market, Industry, Entrepreneurship and SMEs (DG GROW); DG Agriculture and Rural Development (DG AGRI); DG Environment (DG ENV), DG Taxation and Customs Union (DG TAXUD), DG Health and Food Safety (DG SANTE), DG Communications Networks, Content and Technology (DG CNECT), DG Climate Action (DG CLIMA), DG Energy (DG ENER), Delegation of the European Union to Canada