We all know it, but just in case somebody missed it, CETA means “Comprehensive Economic and Trade Agreement” and it is a free-trade agreement between Canada and the European Union that will eliminate up to 99% of the duty tariffs between Canada and the EU.
When we hear on the news about CETA, it is mostly about two things:
1.Recent steps forward from the EU or Canada’s institution toward the implementations,
2.Group of people X from country Y that are against CETA for the reason Z.
With that in mind, we will briefly talk about these two points moving forward:
1. CETA is moving forward, and even if the major newspapers do not cover it step by step, the European Parliament and three countries have already ratified the agreement at their local parliaments (Latvia, Denmark and Spain).
2. We are certain that CETA is the most important and comprehensive agreement that the EU and Canada have ever negotiated, and discussions are a normal and healthy follow up (if good points are made).
Usually, a lot of people consider that, due to the fact that the CETA must be ratified by all EU’s 28 countries (UK is still in until March 2019), and even some regional parliament for some countries, the application will be postponed for at least 2-3 years.
This is not entirely true, or better said, it is true only for approximately 10% of the CETA, that require approval by EU member states and regional chambers (areas such as investment protection and the new investment court system), in the meantime, a provisional application on the other aspects is possible.
This was clarified by a recent decision made by the European Court of Justice on EU Competence in the EU-Singapore Trade Deal. Even if the decision was taken for the EU-Singapore free-trade agreement, clarifying the exclusive competencies of the EU and the competencies that must be shared with the member states, it still gave us a lot of discussion material regarding the following two aspects (we are going to detail only the first one, though):
1. Which chapter of the CETA can be subjected to provisional application due to the fact that the EU parliament already approved the deal.
2. How this will influence the negotiation for Brexit between the EU and the UK government, now that the ECJ clarified that the areas marked as “Non-direct foreign investment” and “dispute settlement between investors and States” are under the competence of the 38 parliaments within the EU. (we will discuss this matter separately, at a later date)
Excluding the areas underlined by this decision, the other chapters of CETA are allowed to be enforced within a provisional application, thus providing us with the last piece of the puzzle: the date of official enforcement of the provisional application. The date has been established during the G20 in Hamburg as Prime Minister of Canada, Justin Trudeau, and the President of the European Commission, Jean-Claude Juncker, agreed to set the start of the provisional application of the CETA from the 21st of September 2017.
A small recap of the information we have so far:
1. Canada and EU discuss a free trade agreement, both Canada and EU Parliaments approve the agreement during 2017.
2. ECJ ruled the competencies that could be enacted for a provisional enforcement, without the approval of the EU member states.
3. Canada and the EU set the provisional application date starting September 21st 2017.
I would like to make some consideration regarding one of the aspects that I feel less discussed: the “MRA”- Mutual Recognition Agreements for the professions.
The MRA, covered by chapter 11 of the CETA, will be part of the provisional application, as confirmed by the ECJ, and for our profession it could be of interest to be analyzed in detail.
The aim of the MRA is to help the mutual recognitions of professional qualifications, such as doctors, architects, accountants, engineers between Canada and the EU, helping the integration between the two blocks.Right now, strictly speaking for the accountants, it already exists some MRA between the CPA and local EU bodies, but these are bilateral agreements negotiated between the CPA of the X Canadian province and the local body of Y EU country. Also, the national recognized bodies can vary province by province, for example The Institute of Chartered Accountants of India is recognized in Ontario, but not in Quebec.
The fact that professional qualifications are of provincial competence (for Canada) and of member state competence for the EU, complicate the application of chapter 11. In the specific, the CETA due to the fact that the EU and the federal government are not responsible for the professional bodies, cannot oblige the regulators of the various member states/provinces to negotiate and sign MRA’s.
What CETA’s chapter 11 actually does are two important things:
1. Encourage its relevant authorities or professional bodies, as appropriate, to develop and provide Joint Committees on Mutual Recognition (art 11.3.1)
2. Provide guidance/framework on such committees and how they should operate. (art 11.3.2-6)
Guidance includes recommendation on planning and developing with a focus on the potential value. These are specified especially in art 11.3.2:
A recommendation shall provide an assessment of the potential value of an MRA, on the basis of criteria such as the existing level of market openness, industry needs, and business opportunities, for example, the number of professionals likely to benefit from the MRA, the existence of other MRAs in the sector, and expected gains in terms of economic and business development. In addition, it shall provide an assessment as to the compatibility of the licensing or qualification regimes of the Parties and the intended approach for the negotiation of an MRA.
We do expect committees to start forming, or at least discuss the opportunity to create a mutual integration/recognition system, considering that the currents MRA cover basically the north-west of the EU.
So far, not many details have been disclosed about any committee at all, we only know that ,within Canada, discussions on the MRA have started, but nothing more.
Together with the colleagues from Crowe Soberman (Toronto) and Crowe Horwath International, we will keep you informed regarding this topic, and we will provide you with more articles about CETA in the future, as there is a lot to cover that could impact us and our clients.
Special thanks to Patrick LeBlond, associate professor and holder of the CN - Paul M. Tellier Chair on Business and Public Policy at the University of Ottawa’s Graduate School of Public and International Affairs, for insights on the topic.
For further information about the CETA, do not hesitate to contact me or my colleagues.
Crowe Horwath Romania – Bucharest
Camillo Giovannini – Audit & Forensic Partner
Crowe Soberman LLP – Toronto
Jordan Caplan – Incorporated Partner
Crowe Horwath International – New York
David Chitty – International Accounting & Audit Director