According to article 24 of the General Agreement on Tariffs and Trade (GATT), preferential trade arrangements (custom unions) and free trade areas are allowed by the World Trade Organization (WTO). The GATT requires that these agreements cover substantially all trade and that existing external tariffs should not be raised by the countries concluding free trade agreements. Article 24 of GATT stipulates that:
A free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce.. .are eliminated on substantially all the trade between the constituent territories in products originating in such territories.1
Unfortunately, the prescriptions of article 24 requiring substantially all trade to be covered by a free trade area have never been enforced, and in fact, what "substantially all trade" means has never been defined.2 As a result, many free trade agreements have often excluded sensitive sectors like agriculture but those agreements have still been accepted by the GATT With an eye to article 24, Canada's chief negotiator for the Canada-EU agreement, Steve Verheul, has stated that "we have agreed from the start everything is on the table."3 Thus, one major objective of this article is to assess the major challenges that the Canada-EU negotiators will face in tackling the entrenched agricultural trade barriers that exist on both sides of the Atlantic.
In October 2008, Prime Minister Stephen Harper of Canada and President Nicolas Sarkozy of France confirmed during the Canada-EU summit that Canada and the EU would explore the possibility ofa free trade agreement. A few months later, in May 2009, the launch of the negotiations for a comprehensive economic and trade agreement (CETA) was announced. The negotiations are expected to take two and a half years to complete. The first round of talks was held in October 2009, followed by further discussions in January, April, July, and October 2010, and January, April, and July 2011. After seven rounds of negotiations, Foreign Affairs and International Trade Canada indicated that significant progress had been achieved in several sectors, such as goods, services, investment, and government procurement, and that the electronic commerce chapter had been dosed.4 Less progress had been made on other areas, including agriculture.
In October 2008, Canada and the EU released a joint study, "Assessing the costs and benefits ofa closer EU-Canada economic partnership," which outlines the economic benefits that could arise from closer economic integration, namely that GDP in Europe would increase by 0.08 percent and in Canada by 0.77 percent.5 This study is the source of the estimated $12 billion benefit to Canada that is often mentioned in news reports. Canada and the EU have agreed that the major areas for negotiation are trade in goods and services, investment, government procurement, regulatory cooperation, intellectual property, temporary entry of business persons, competition policy, labour, and the environment.6 The results of these types of economic-impact studies should be interpreted with caution as the assessments are completed in isolation from all other factors and subject to important assumptions. For example, one of the basic assumptions of this study is that Doha round of WTO negotiations would be completed and successful. Also, the study was completed before the global financial and economic crises. Thus it provides only an indication of possible impacts on the participating countries, subject to different assumptions and no change in the external factors.
The attempt to create closer economic cooperation between Canada and the EU has been given a boost by three factors. First is the glacial pace of the Doha development agenda at the WTO. The long and inconclusive multilateral trade negotiations have resulted in an increased interest in regional trade agreements. …