The Comprehensive Economic and Trade Agreement (CETA) between the European Union (EU) and Canada is one step closer to its entry into force. The Federal Constitutional Court in Karlsruhe also gave the go-ahead, subject to conditions, for the Federal Government to give its consent in the Council to the provisional applicability of those parts of the Free Trade Agreement which fall within the competence of the EU. These include in particular the reduction of customs duties and the granting of Preferential customs duties. These are always linked to certain conditions. Find out more now and secure a competitive advantage.
The agreement provides in particular for the abolition of trade restrictions such as Customs duties for. It also includes rules to remove restrictions on access to public contracts, the establishment of investment arbitration tribunals and the opening of both markets for agricultural products.
Federal Constitutional Court does not stop CETA
On 13 October 2016, the Federal Constitutional Court in Karlsruhe rejected applications for interim injunctions to stop CETA on 13 October 2016.
At the same time, however, the court had imposed conditions. Germany must ensure that certain conditions are met in order for CETA to remain legal. The Federal Constitutional Court found that the agreement falls within the competence of both the EU and the member states. The Federal Government must therefore ensure that an EU Council decision on provisional application will only cover those areas of CETA which are also within the competence of the European Union. Customs duties and tariff preferences are within the competence of the EU, so that provisional applicability is possible by a Council decision and will probably not be revoked by the Federal Constitutional Court if certain conditions are complied with.
Another condition was that the decisions taken in the Ceta Joint Committee must be sufficiently democratically reconnected. The EU’s democratic deficit has been repeatedly criticised. Since representatives of the EU and Canada, but not necessarily German politicians, sit on the joint CETA committee, the court saw democratic legitimacy as at least problematic. The Court also made it clear that Germany must be able to end the provisional application of CETA unilaterally.
The Constitutional Court has thus paved the way for the provisional applicability of CETA. It should be noted, however, that it has only been examined whether Germany may agree to the provisional application. Whether the agreement itself is constitutional will be decided by the Federal Constitutional Court in the coming months.
Be ready for CETA
The importance of CETA for the European market should not be underestimated. Canada is the tenth largest economy in the world and the EU is the second largest trading partner for the country. Canada exports mainly agricultural products and energy raw materials. Important imported goods are motor vehicle parts and machinery.
It is still unclear when exactly the agreement will enter into force. The Federal Ministry of Economics and Energy (BMWi) does not expect a provisional application before the first half of 2017. It may be some time before it is fully and definitively applied. After lengthy controversies over the powers to conclude the agreement, the Commission has decided that the parliaments of the member states must ratify the agreement.
Nevertheless, companies should prepare themselves early for CETA in order to take up a strategically favourable market position at the time of its provisional applicability.
The Free Trade Agreement can have a major impact on the future of companies operating in the Canadian market or otherwise involved in Canadian trade. We therefore inform you exactly about the current developments. Contact us here.