William Mwanza, tralac Researcher, comments on the Canada-EU negotiations towards a Comprehensive Economic and Trade Agreement and what it may mean for Africa

Multilateral trade efforts continue to stall, yet regional initiatives keep moving ahead. This reality of the global trading environment has reaffirmed its presence again with the recent setback in WTO talks, as members missed the 31 July deadline for adoption of the Bali Package (see recent tralac discussion notes entitled ‘Bali Package deadlocked: What are the bigger picture implications’ and ‘The WTO Trade Facilitation Agreement – the central issue and the multilateral implication’). In recent times, negotiations towards conclusion of two mega agreements namely the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) have received considerable focus as they involve the conclusion of free trade arrangements between a number of major players in the global economy. Apart from these regional arrangements, there are also bilateral deals that countries continue to conclude so as to facilitate greater levels of trade between themselves. One such agreement is the Comprehensive Economic and Trade Agreement (CETA) recently finalized by Canada and the EU. This deal covers liberalisation in tariffs, cross-border investment and trade in services. It is seen as historic for Canada and is also being viewed as a template for TTIP negotiations by the EU. It is expected to be signed by next year, and to enter into force in 2016.

The EU is traditionally a significant trading partner of most African countries. In view of this, its conclusion of the CETA with Canada will have important implications for these countries, particularly in terms of their competitive access to the EU market, in what is a continually changing global trading environment.

Canada is an important country to consider in two respects. Firstly, its economy (US$1.5 trillion based on latest figures) is just under half that of the African economy (US$3.7 trillion). Its economy weathered the global economic crisis quite well, and has consistently been the best performing G-7 economy since 2009, in terms of job creation, economic growth, and financial stewardship. This strong performance is expected to be buoyed further, as it is projected that the CETA will add US$12 billion annually to Canada’s economy.

Secondly, Canada is a significant player in global trade, accounting for 2.4% of global imports and 2.5% of global exports in 2013. These figures are quite close to the African continent’s share in global trade, which was 3.1% of imports and 3.2% of exports, respectively. Given such an overall picture, it would be important to look briefly at some of the African countries that would potentially be challenged further by Canada in their exports to the EU market.

According to data sourced from the International Trade Centre (ITC), out of the top 20 products that the EU imports from Africa, 10 products are also imported from Canada. These products (aggregated at the HS2 level) and the associated African exporting countries are as follows:

▪ Pearls and precious stones ▪ Mineral fuels ▪ Machinery ▪ Ores, slag and ash ▪ Electrical and electronic equipment ▪ Inorganic chemicals ▪ Aluminium and articles thereof ▪ Vehicles other than railway and tramway ▪ Iron and steel ▪ Edible vegetables

South Africa and Botswana Algeria, Nigeria, Libya and Angola South Africa and Tunisia South Africa Tunisia and Morocco Niger, Algeria, Morocco, and South Africa Mozambique, Egypt and South Africa South Africa and Morocco South Africa Morocco, Egypt and Kenya

Overall, South Africa is the main import source for the EU in a number of products that it also sources from Canada. Some of the other import sources that feature more prominently in the EU’s import profile are Algeria, Tunisia, Morocco, and Egypt.

Of the 10 products cited above, mineral fuels made up 65% of the EU’s total imports from Africa in 2013. The rest of the products took up much lower shares, with pearls and precious stones at 4.9%, and electrical and electronic equipment at 3.1%. The seven remaining products (namely machinery; ores, slag and ash; inorganic chemicals; aluminium and articles thereof; vehicles other than railway and tramway; iron and steel; and edible vegetables) ranged between 0.9% and 1.8% of the EU’s total imports from Africa.

On the other hand, most of the 10 cited products appear to be important exports for Canada to the EU. Pearls and precious stones made up 24.5% of Canada’s exports to the EU in 2013. Mineral fuels accounted for 9.6%; Machinery for 8.8%; Ores, slag and ash for 8.5%; Electrical and electronic equipment for 4.6%; and Inorganic chemicals for 4%. The four remaining products (namely aluminium and articles thereof; vehicles other than railway and tramway; iron and steel; and edible vegetables) ranged between 0.8% and 1.3% of the EU’s total imports from Canada in 2013.

When these products are compared in terms of their share in the EU’s imports from the world, the share of African countries in the EU’s imports from the world is seen to be higher than Canada’s in all of the 10 products. Mineral fuels accounted for the largest share at 4.3% compared to Canada’s 0.1%. This was followed by edible vegetables which constituted 3%, compared to Canada’s 0.4%. Pearls and precious stones had the third highest share at 2%, compared to 1.7% for Canada. Other products that had a somewhat significant share in the EU’s total imports from the world in 2013 are inorganic chemicals at 1.7% compared to Canada’s 1.2%; aluminium and articles thereof at 1.6% compared to Canada’s 0.3%; and ores, slag and ash at 1.5% compared to Canada’s 1.2%.

Hence the picture that can be seen is one where a strong Canadian economy has some important exports to the EU which are also important for some African countries. Though its share in the EU’s imports from the world is generally lower in these products, it would be helped by the CETA and potentially see an increase in exports of these and other products - beef, pork, seafood, mining, forestry and telecommunications have also been cited as potential beneficiaries of the CETA - to the EU, thereby providing further competition to African countries in that market. For African producers and exporters of these products to the EU, this is a dynamic that would have to be closely considered.

Tell us what you think.

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Sources:

Financial Post. 2013. Here’s who wins and loses in the Canada-EU trade deal. [Online]. Available at: http://business.financialpost.com/2013/10/18/canada-eu-trade-deal-winners-losers/

Financial Post. 2014. Canada, EU agree on ‘historic’ free-trade pact – but there’s still more work ahead. [Online]. Available at: http://business.financialpost.com/2014/08/05/canada-and-eu-negotiators-said-to-have-finalized-the-text-of-a-proposed-free-trade-deal/

Government of Canada. 2013. Canada’s State of Trade: Trade and Investment Update – 2013. Online. Available at: http://www.international.gc.ca/economist-economiste/performance/state-point/state_2013_point/index.aspx?lang=eng#1.0

International Trade Centre. 2014. ITC Trade Map. [Online]. Available at: www.trademap.org

World Trade Online. 2014. Canada-EU Finalize Trade Deal; Brussels Eyes 2016 Entry-Into-Force. [Online]. Available at: http://insidetrade.com/Inside-US-Trade/Inside-U.S.-Trade-08/15/2014/canada-eu-finalize-trade-deal-brussels-eyes-2016-entry-into-force/menu-id-172.html