On June 23, 2016, Britain voted to leave the European Union. Does the Brexit decision affect the Canada-EU Comprehensive Economic and Trade Agreement (CETA)? The answer is most likely and sadly “Yes”.
In October 2013, Prime Minister Harper and José Manuel Barroso announced an agreement in principle. In August 2014, Canada and the EU announced that they had completed the text of the CETA, marking the conclusion of negotiations. In October 2014, Canada and the EU released the completed text of the CETA at the Canada-EU Summit in Ottawa. On February 29, 2016, Canada’s Minister of International Trade, Chrystia Freeland, and the European Union’s Commissioner for Trade Cecilia Malmström announced the completion of the legal review of Canada-EU CETA. The Final Text was released.
However, Canada has not tabled implementing legislation in Canada’s Parliament. As a result, Canada has not taken steps to ratify the CETA. The same holds true across the pond. The EU Member States must each ratify the CETA under domestic laws (not an EU law) and none have done so yet.
The good news for Canada is that each EU Member State signed the CETA separately to commit to the negotiated agreement and EU Member States signed separate side letters. However, the fact that each EU Member State participated in the long negotiation process and signed individually (rather than as a single entity) does not mean that everything will remain on track. There is hope that all EU Member States will see the benefits of CETA and continue the ratification process – we have come so far.
That being said, Canadian businesses need to be realistic. The Brexit decision will most likely put Britain’s exit from the EU (and potential other referendum campaigns) as a higher priority for the EU Member State governments than the CETA.
In addition, and importantly, Britain was one of Canada’s best allies in the Canada-EU CETA negotiations. If Britain is no longer pushing the CETA agenda, it may be that the changes within the European trading relationship will be the priority for years to come and CETA will never be ratified.
Chapter 34 of the CETA (Article X.09) addresses the accession of a new member to the EU. It does not address the exit of a country from the EU. The negotiators did not cover off that scenario because no one thought it would ever happen. Oooooppps.
Chapter 34 of the CETA (Article X.06) sets out the entry into force provisions. The CETA will enter into force on the first day of the second month following the date on which the Parties have notified each other that the procedures to ratify in domestic law of each signatory have been completed. The problem is that if ratification does not occur in each of the Parties, the second month will never come. It is drafted as an all-or-none proposition.
However, there is a glimmer of hope. Pursuant to Article X.02 of CETA, the EU Member States and Canada may agree, in writing, to amend the CETA. Any amendment shall enter into force after the Parties exchange written notifications certifying that they have completed their respective applicable internal requirements and procedures, on such date as the Parties may agree. It may be possible for the EU Member States, Britain and Canada to agree to amend the coming into force Article X.06 provisions to allow for the CETA to have effect on a country- by-country basis. Article X.06 of CETA specifically allows that the Parties may, by mutual agreement, fix another date for coming into force. This is not an ideal scenario, but it is better than throwing the CETA text in the recycle bin.