Why the Canada-EU free trade agreement will benefit Ontario

Why the Canada-EU free trade agreement will benefit Ontario

The European Union is Ontario’s second most important trading partner after the United States. With the signing of the Canada-EU Comprehensive Economic and Trade Agreement (CETA), Ontario stands to gain tremendous economic benefits, both in the immediate and long term. 

The EU is the single largest market in the world with a population of 500 million consumers, 14 times the size of the Canadian population, and an annual gross domestic output of almost $ 17 trillion.[1] Strengthening trade links with Europe is an important opportunity for Ontario to geographically balance its export economy. While the US remains Ontario’s most important trading partner, CETA allows Ontario to benefit from diversified sources of growth in the future.

Across Ontario, a wide range of business sectors will gain expanded access to European markets, as tariffs on almost all of Ontario’s key exports will be removed. With more sales of Ontario goods and services, the government estimates that 30,000 new jobs will be created in the province.[2] Under CETA, Ontario’s exporting businesses could save $100 million per year as a result of tariff reductions. Currently, Ontario’s export businesses face tariffs rates between 6.5 to 14 percent. For example, exports of advanced manufacturing goods to the EU, worth an annual average of $ 2.1 billion between 2010 and 2012, face tariffs up to 8 percent. Exports of information and communications technology (ICT) goods to the EU face tariffs rising as high as 14 percent.[3]

With increased competition, a number of business sectors will experience disadvantages in the short term. Concerns about the trade deal’s effect on the province’s pharmaceutical, dairy, wine and spirits industries remain. A properly thought out short-term compensation scheme and a slow phase in of import quota changes will contribute to lessen immediate negative impacts.[4]

In the long run, trade has the potential to spur Ontario’s international competitiveness and stimulate business to upgrade their offerings and become more productive. The provincial and federal government should be congratulated on reaching this important milestone, the most ambitious trade initiative since the North America Free Trade Agreement (NAFTA). With a successfully completed trade agreement, Canada sends out a strong signal to other emerging trade markets that it is an ambitious and well-prepared trading partner. Deepening Ontario and Canada’s relationship with international emerging markets will be a critical element of Ontario’s future prosperity.

 

[1] Government of Canada, "How CETA will benefit Ontario."

[2] “Ontario to Support European Trade Deal,” Government of Ontario, last modified October 18, 2013, accessed October 22, 2013, http://news.ontario.ca/medt/en/2013/10/ontario-to-support-european-trade-deal.html

[3] Government of Canada, "How CETA will benefit Ontario."  

[4] “Ontario to Support European Trade Deal,” Government of Ontario, last modified October 18, 2013, accessed October 22, 2013, http://news.ontario.ca/medt/en/2013/10/ontario-to-support-european-trade-deal.html

Photo Credit: cbies, Getty Images 

Category: Economic Progress, Trade