The seminar “Destination Business Québec”, promoted by the Québec Government Delegation in Rome in collaboration with Nctm Studio Legale and Centro Studi Italia Canada (CSIC), was the opportunity for international experts to share with the those who attended their expertise on a variety of issues including i) Italy-Canada business relations, ii) resources and investment opportunities in Québec, iii) the attractiveness of investment, iv) Canadian migration policies, v) EU business policies and vi) the EU Canada Free Trade Agreement (CETA). 

 

Bernard O’Connor, partner of Nctm Studio Legale and international trade expert, along with Pierre-Marc Johnson, one of the negotiators of the CETA, made up the panel on “CETA and opportunities for Italian enterprises”. We took this opportunity to ask Bernard O’Connor his views on some of the key themes of the CETA. 

Almost all of the key CETA provisions came into effect on 21 September 2017. This agreement is considered a sort of modern and innovative FTA: which are, in your opinion, the changes that make CETA a model for the other FTAs that the EU is currently negotiating?

Bernard O’Connor: Traditional trade agreements sought to remove at-the-border barriers to the trade of goods. In other words, these agreements were designed to remove customs duties and quantitative restrictions. CETA is a new model trade agreement. It goes behind-the-border to address domestic practices which are sometimes more restrictive of trade than border measures. For example, EU companies could not tender or compete to sell goods and services to Canadian public institutions (governments, provinces, private bodies exercising public functions). The public procurement provisions of CETA now open up this vast market for EU enterprises. 

CETA is not a simple or traditional agreement on trade in goods. It includes services which today most economists and politicians recognise as the largest part of our economies. The Agreement opens the Canadian financial services, telecommunications and transport markets for EU enterprises as well as providing for the mutual recognition of qualifications for professionals such as architects, lawyers, accountants and engineers. This will result in significant increases in the flow of services between the two parties. 

CETA helps small and medium sized enterprises to trade across the Atlantic by simplifying customs procedures and setting up a framework to make technical standards and requirements more compatible. It has provisions on intellectual property and investment. 

Probably the most innovative aspect of CETA is that it addresses the issue of sustainability in that it looks at the protection of labour rights and the environment. 

In summary, the innovation of this new type of free trade agreement is that it looks beyond the border to the domestic market and opens opportunities to market EU goods and services in Canada. At the same time it ensures respect of the values inherent in the organisation and regulation of markets in Canada and the EU. 

 

FOOD & BEVERAGE

For the first time, thanks to CETA, European, and hence Italian, food&beverage products have obtained the recognition and protection of important Italian geographical indications in overseas markets. It is well known that the concept of controlled Designations of Origin (DOC) does not exist in North America and the recognition of geographical indications should be considered an achievement for European and, in particular, Italian producers. The view that CETA is a success is a view not shared by everyone: indeed there is a strong hostility towards CETA and, in particular, the provisions concerning agrifood products. Why? What is there to fear? Surely CETA has not introduced changes that diminish the protection of agrifood goods, but has created greater protection for our products.

Bernard O’Connor: Many economic actors in North America consider the EU system for the protection of Geographical Indications (GIs), an attempt to carve out, for European quality food producers, the exclusive right to use certain names in relation to certain foods. 

This attitude is not present across the whole food spectrum. The US, for example, has a very well developed system for the protection of wine names such as Napa Valley and in fruits and vegetables there is protection of Idaho potatoes and Vidalia onions. Today there are many forces in both the US and Canada promoting the concept of geographical indications. 

The new type trade agreements like CETA address the protection of intellectual property. As such, the EU has insisted with its trading partners that the protection of geographical indications (GIs), a form of intellectual property, must be included in the deal. If our trading partners want to address the protection of copyright or patents or industrial designs, all forms of intellectual property, the EU insists that all forms of IP are negotiated. 

North American cheese producers want to use the names Gorgonzola, or Parmigiano, or Feta to describe the cheese they produce and are opposed to any trade deal that would restrict what they consider to be their freedom to use these names on their products. This is one of the reasons why the EU has chosen to negotiate the protection of individual GIs (those ones that US producers consider to be generic), rather than addressing the system by which GIs should be protected. The EU has had considerable success in this endeavour. Canada has agreed within CETA that certain names can only be used on foods if they come from the origin indicated by the name. In other situations the EU has negotiated coexistence so that long standing Canadian trade marks can be used to market products alongside products labelled with the EU GI. 

The protection of GIs is only one of the many concerns raised by stakeholders on trade in agriculture and food. Many forces in Canada were reluctant to agree on GIs or on access for EU dairy products. Many forces in the EU were reluctant to agree on EU market access for beef and other sensitive products. In addition there were concerns in relation to the nature of the standards to ensure the health and safety of foods. Many in the EU are reluctant to accept genetically modified foods or post-slaughter treatments for carcases like chlorine washes. 

Food is big business but it is also a core element of our daily lives so it is not surprising that trade agreements addressing the movement and quality of foods should give rise to significant public debate. However, much of the debate is uninformed and is made in ignorance of the safeguards put in place in the Agreement. EU standards have been protected and trade has been opened up. There is now room for traders to develop the movement of foodstuffs across the Atlantic.  

 

PHARMACEUTICAL, PATENT PROTECTION, MEDIUM AND ENTERTAINMENT, FASHION AND DESIGN.

Besides the provisions on geographical indications, CETA has significantly dealt with several other aspects concerning the protection of industrial and intellectual property, trying to “bring into alignment”, to the greatest extent possible, the forms of protection and the remedies available to rights holders and thus to make the circulation of innovative products, technologies, correlated contents and services between Canada and EU even more easier. By way of example, CETA has strengthened patent protection in the pharmaceutical sector and customs measures aimed at preventing the entrance and exit of pirated and counterfeit products. In addition, the agreement has introduced rules on public communication services and liability of intermediaries (including internet providers), thus providing across-the-board rules, with implications for a large number of sectors, from hi-tech industry to entertainment. What are these innovations and how can Canada-EU exchanges benefit therefrom? 

Bernard O’Connor:  This is very true. Besides the provisions on GIs, CETA aims to create a friendlier environment and a more complete legal framework for those enterprises and professionals dedicated to bringing innovative products and services onto the marketplace. CETA is based on the idea that the protection of intellectual property, if not properly regulated, may create unjustified barriers to trade.

With regard to the pharmaceutical sector, for example, CETA requires Canada to enact specific provisions in their patent law that will enable pharmaceutical companies to apply for “patent restoration”. This provision allows companies to obtain, under certain conditions, longer protection for patented drugs. The patent restoration term is based on the idea that companies should be able to recover that part of the normal 20 year patent protection period they lose while the drug is going through the marketing or regulatory approval process. This exceptional extra-protection tool was already in force in the EU, but before CETA there was no such rule in Canada.

With regard to IP border enforcement measures, CETA requires Canada to replicate the rights that EU IP rights holders have. These rights allow all IP rights holders to prevent goods which infringe IP rights from crossing the border. It will now apply in both Canada and the EU.  

In the media & entertainment sector, CETA contains a number of provisions which attempt to bring the laws of Canada and EU into alignment with respect to:

• the unauthorized wireless broadcasting or communication to the public of live performances of copyrighted works, and the equitable remuneration due to perfomers; 

• IP owners’ right to use technological measures of protection on media containing copyrighted works or the related reading/playing devices, and to avail of remedies to contrast their circumvention;

• the liability threshold which should apply to all intermediaries (including internet service providers) whose technical activity may be used by infringers to violate IP rights. 

Finally, and of particular interest to the Italian fashion and industrial design sectors, CETA contains a provision which requires Canada to recognize, under certain conditions, a certain level of copyright protection for design works. 

These are provisions which are not found in traditional trade agreements and set a standard for future negotiations.

 

DISPUTE RESOLUTION MECHANISM

CETA is the result of long negotiations, almost thwarted just before its execution due to Wallonia’sveto on the new mechanism for the settlement of disputes between States and investors. The crisis was solved thanks to the intervention of the Federal Government of Belgium which, in agreement with the regional governments, agreed to a Belgian request for an opinion of the European Court of Justice on this part of CETA. For the time being, CETA provisions concerning the new dispute resolution mechanism, Investment Court System, have not come into effect and a commission is working to solve the issue: so, what solutions can be found? What would happen in case of negative ruling by the Court?

Bernard O’Connor: Two weeks before the provisional entry into force of CETA, Belgium submitted a request to the European Court of Justice for an opinion on the compatibility of CETA with EU law. Belgium is concerned with two aspects of CETA: the provisions on investment and the provisions on dispute settlement. 

To a certain degree the issue in relation to investment has already been addressed. The European Court of Justice (ECJ), the de facto EU supreme Court, has ruled in an earlier Opinion (in relation to the agreement between the EU and Singapore) that portfolio investment does not come within the exclusive competence of the EU. Thus if an agreement contains provisions on this subject the agreement would need to be ratified not only by the EU itself but by each Member Stateas well. 

The issue of dispute settlement, and in particular the creation of a new Investment Court system, is more open. Essentially the ECJ must determine if the new system infringes on the EU law principle of autonomy. 

In the early days of the EU, when it was still the European Economic Community (EEC), the ECJ ruled in Costa v ENEL from 1964 that the EU Treaties had created a new system of law whole unto itself and independent from national laws. In Opinion 2/13 the ECJ, built on this idea and, in effect,found that the EU could not become subject to the European Court of Human Rights as this would infringe against the independence and stand-alone nature of the EU legal system. In case C-459/03, the Court ruled that ‘an international agreement cannot affect the allocation of responsibilities defined in the Treaties and, consequently, the autonomy of the Community legal system.’ 

The  posed by Belgium is whether the Investment Court System would interfere with the independent system of law and the roles of the EU Courts to ensure the harmonious and uniform interpretation of that law across all Member States and for all purposes. It is too early to tell which way the Court will decide. 

 

CETA E WTO

Are there conflicts or overlaps between the measures adopted by CETA and those already contained in the WTO?

Bernard O’Connor:  CETA is an international agreement that has been built-up on the basis of WTO law. The very idea of a free trade agreement comes from the WTO’s GATT agreement. So CETA has been designed not to be in conflict with the WTO but rather to add trade opening provisions that have not been agreed within the WTO. Trade experts talk of CETA being a WTO-plus agreement. In other words, it has provisions in addition to those contained in the WTO. 

All the main provisions of CETA go further than the WTO. Canada and the EU will apply lower customs tariffs in the trade between them than they will in trade with other WTO members. Public procurement is not integrated fully into the WTO in that not all WTO members are party to the government procurement agreement, but public procurement is fully within CETA. CETA provides much greater agreement on trade in services than in the WTO services agreement and so on. 

The EU and Canada have chosen to use the bilateral approach to opening up markets to trade because the multilateral WTO approach is somewhat frozen for the time being. If the 160 odd WTO members are not in a position to improve the market opening function of the WTO then manyWTO members (and in this case Canada and the EU) have chosen to go ahead themselves. The EU is currently negotiating bilateral trade agreements with most major markets in the world. Canada is doing the same. 

At some stage in the future, this web of bilateral deals is likely to cause confusion, if not conflict,and most trade negotiators hope that this will stimulate a multilateral trade improving deal in the WTO. For the moment, however, the WTO remains the base-line and the bilateral trade deals provide extra benefits to the parties concluding them.