Meeting of the CETA Committee on Trade in Goods meeting

March 8, 2022, by videoconference, hosted by Canada

Report

1. Adoption of the agenda

Canada proposed an additional agenda item in the Any Other Business section: MFN withdrawal for Russia and Belarus. The agenda was then adopted.

2. Report of the Joint Sectoral Group on Pharmaceuticals (Canada and EU item)

The EU presented the joint report of the Joint Sectoral Group on Pharmaceutical Products which took place on November 18, 2021. The initiative to extend the recognition to inspections outside of respective territories, for products within scope of the CETA protocol, was successful and concluded in April 2021. Canada and the EU continue work on evaluation of respective EU and Canadian programs for the possible extension of the operational scope of the CETA Protocol on Pharmaceuticals to include active pharmaceutical ingredients.

3. Report of the dialogue on intellectual property held on 3 February 2021 (Canada and EU item)

Canada and the EU provided a report from the meeting of the intellectual property (IP) dialogue that took place in February 2021, during which Canada and the EU exchanged information on issues related to pharmaceutical IP, and provided updates regarding respective trademark regimes, including Canada’s 2019 implementation of two international trademark-related treaties. Canada and the EU also discussed enforcement, where the EU delivered a presentation on the EU Customs Action Plan to combat IP infringement 2018-2022 and the results of the EU customs detentions, and Canada provided information on Canadian Border Services Agency (CBSA) authorities to seize and destroy counterfeit and pirated goods at the border. The EU also provided an overview of the IP provisions under some of its more recent agreements. Canada committed to send the information and data requested by the EU showing the upward trends on customs seizures and destruction of counterfeit and pirated goods at the border.  The EU also recalled that the IP priority with Canada remains the enforcement and protection of Geographical Indications.

4. Proposal for Luxury Tax in Canada (EU item)

The EU reiterated its concerns on the effects of Canada’s proposed luxury tax on vehicles, boats and aircraft, as already expressed in the comments submitted to the public consultation on this issue in September 2021. The EU sought information on the timelines and legislative process for this measure. The EU asserted that the proposed tax would apply to a substantial part of EU exports of cars and could impact those exports disproportionately compared to domestically produced cars.  The EU also noted its view that this measure could undermine Canada’s green agenda, contending that it would hit low and zero emissions vehicles more than traditional ones. The EU called therefore for ensuring that vehicles imported from the EU are not de facto discriminated, and for the exclusion of zero and low emitting vehicles from the scope of the measure. The EU also flagged its concern of increased financial burden in the cases when the proposed luxury tax is coupled with existing provincial measures with similar effects. Canada explained the policy intent of the luxury tax and provided the state of play on the possible timing of legislation, noting that consultations were held with stakeholders to inform its drafting. Canada noted its commitment to targets on zero emission vehicles and that a number of programs are in place to provide incentives. Canada committed to provide the EU notice once the draft legislation is published and explained that it would not send the information requested by the EU following the dialogue on motor vehicles since Canada does not track the information requested in that context. Rather, Canada committed to sending public information on vehicles made in Canada Subsequent to the meeting of the CETA Committee on Trade in Goods, draft legislation for the luxury tax was released on March 11, 2022, and was provided to the EU.

5. EU Environmental Footprint and Canadian policy work on product sustainability (Canada and EU item)

The EU provided an update of the Commissions’ revised Recommendation on the use of Product Environmental Footprint (PEF) and Organization Environmental Footprint (OEF) methods adopted in December 2021. Canada raised this issue to underline the potential commercial impact and the importance of developing conformity assessment frameworks that seek to minimize the costs of compliance for Canadian exporters while achieving the regulatory objective. Canada also noted the interest of Canadian industry stakeholders to participate in updating and expanding the PEF/OEF methods.

The EU indicated it is working on the Green Claims initiative, which aims to ensure that green claims are reliable, comparable and verifiable by using standard PEF/OEF. This initiative went through public consultations and it is still in the impact assessment phase. Options include voluntary or mandatory approaches for substantiating voluntarily made environmental claims. A set of options look at who can verify the information and the assessment considers costs and access to verification. The adoption is foreseen for July 2022. The role of the revised Recommendation of December 2021 was to provide an updated version of these PEF/OEF methods to ensure that EU policies such as the EU Batteries Proposal and the delegated act on climate mitigation and adaptation under the Taxonomy Regulation referred in this revised Recommendation were linked to the right version of the PEF/OEF methods. Canada noted its interest in understanding how the EU plans to use the PEF/OEF methods given they are now being referred in a number of policies.

As for participation opportunities for Canadian industry stakeholders, the EU stated that there is an expert group called the Technical Advisory Group, which is open to all stakeholders to participate and advise on methodological issues linked to PEF/OEF. The EU was willing to share the contact information for this group as well as continue the dialogue on this issue.

6. TBT issues:

1. Implementation of the CETA Conformity Assessment Protocol (Canada and EU item)
   Canada and the EU noted the positive developments related to the conformity assessment protocol with the Standards Council of Canada now recognized by the EU, and the EU having published its implementation guide. Both parties indicated their willingness to start the work on both sides to consider whether there is interest in expanding the product coverage to other categories beyond those that are already in operation, and in encouraging Canadian and EU accreditation bodies to continue efforts in this regard.
2. EU Proposal for a regulation on deforestation-free products (Canada item)
   Canada indicated its support for EU efforts to discourage deforestation but noted concern that the proposed measure could impact a number of significant Canadian agri-food and forest product export sectors. Canada asked the EU to carefully consider the implications of the measure and how it could be drafted to reduce unnecessary and unintended effects on trade while still fulfilling its legitimate objective. Canada referred the EU to a submission it had provided in the context of a public consultation, which included questions on the proposal related to the country-level risk assessment process, geo-localization requirements, and the effect of multiple similar EU policies on exporters. The EU indicated that an information session was organised on 12 January to which several third country representatives participated (including Canada) and that the replies to questions received on that occasion are currently being prepared and will be circulated to the participants. The EU indicated that the deforestation proposal was a key priority that is not expected to create unintended barriers to trade.
3. Revision of the Renewable Energy Directive (Canada item)
   Canada noted its interest in the proposal to amend the existing Renewable Energy Directive (REDII), particularly regarding possible effects on Canadian biomass exports to the EU. The Commission recalled the main thrust of the proposal and the state of play of its adoption process. Canada recognized the role RED plays in contributing to environmental objectives and noted its support for the risk-based approach that RED takes in meeting these objectives. Canada also noted that it had identified several areas of concern and areas for clarification of terminology that were shared with the Commission as part of the RED consultation process in late 2021. Canada also asked about the Commission’s process for addressing concerns raised by third countries during the legislative process. The EU indicated that the RED II revision proposal was part of the larger “Fit for 55” package of proposals, which aims at reducing GHG emissions by at least 55% by 2030 and that the RED II revision proposal is advancing together with other proposals. The Commission further indicated it takes note of the comments of all stakeholders. The EU explained that an important next step would be reached when the two legislators – (i.e. the Council and the European Parliament) agree on their respective positions for entering into inter-institutional negotiations, which was likely to occur in the second half of 2022.
4. French Labelling Requirement - TRIMAN Logo and Sorting Instructions (Canada item)
   Canada conveyed stakeholders’ concerns over various packaging, labelling and information requirements across several EU Member States. Canada indicated that industry’s main concern is that these measures are not harmonized across EU Member States and are disruptive and costly to comply in multiple jurisdictions.

   The EU replied that it was aware of such technical regulations at Member States’ level and that it was still assessing their compliance with EU law. The EU further stated it was looking at developing proposals to harmonise waste and packaging labelling rules across the EU and one of these initiatives was the EU Packing and Packaging Waste Directive proposal. This proposal was at the impact assessment phase and was expected to be published as part of the EU Circular Economy package on July 20, 2022.

5. Canadian law on the labelling of beverages (EU item)
   Canada provided the EU with an update on the process regarding Canada’s proposed amendments to the Food and Drug Regulations to establish regulations for supplemented foods. The EU referred to its detailed comments submitted on 22 September 2021 in the framework of the TBT notification CAN/647. Canada declared that with reference to the effects of combining alcohol and caffeine, it will take into consideration available scientific evidence including the EFSA Opinion the EU referred to in its comments.
6. Standards for greenhouse mini cucumbers, tomatoes and fruit in Canada (EU item)
   The EU raised its concerns regarding proposed changes to the Canadian Grade Compendium for fresh fruit and vegetables (notified to Canada in the framework of the TBT notifications 654 and 657). The EU noted in particular that the proposed standards differ from the relevant UNECE standards.  Canada provided an update on consultations that took place in late 2021 and the process of reviewing consultation feedback and reviewing standards.
7. EU General products safety directive (Canada item)
   The EU informed about the proposal for a general product safety regulation adopted in 2021 to replace its current General Product Safety Directive, which would create a single set of market surveillance rules for both harmonised and non-harmonised products. Canada noted its support for the goals of the new regulation, while encouraging the EU to conduct and share a rigorous assessment of the trade effects of this measure, particularly on SMEs. Canada shared stakeholder input that identifies particular provisions of the draft measure that seemed excessively burdensome for SMEs, and which the EU could potentially reconsider without reducing the overall effectiveness of the measure. The EU noted that there had been thorough discussion concerning the consequences of the measure for SMEs including a specific annex in the Impact Assessment and noted that safety must be ensured independent of the size of the business. The EU committed to provide contact information in order for parties to continue to engage.
8. EU Artificial Intelligence Act (Canada item)
   The EU presented the main elements of the EU Artificial Intelligence (AI) Act expected to be adopted around end 2022/beginning 2023 with entry into application two years afterwards. Canada drew the attention of the EU to the needs of smaller firms and noted there are many smaller businesses that do not have dedicated regulatory staff. The EU agreed that the needs of SMEs should be adequately considered in the AI Act and highlighted that in fact the proposal already foresees dedicated considerations as well as mechanisms to actively support SME compliance.

   Canada raised the issue of international standards and highlighted the value of allowing Canadian and EU conformity assessment bodies to test to the other jurisdiction’s technical regulations by adding AI as a new product category to the Annex 1 of the CETA Protocol on Conformity Assessment.

   The EU asserted there is a strong linkage between international and EU standards, as the EU standardisation system attaches a lot of importance to (and significantly builds on) international standardisation. In the discussion of the CETA Conformity Assessment Protocol, Canada suggested to consider a possible addition of AI to the list of covered products. The EU is open to explore further the issue of the mutual recognition of conformity assessment.

   The EU agreed to a meeting to provide more information about the AI Act and take note of Canada’s comments

    
9. EU Common Criteria Cybersecurity Requirements (Canada item)
   Canada reiterated concerns with the draft EU Common Criteria (EUCC) scheme and its impacts on the existing plurilateral Common Criteria Recognition Arrangement (CCRA). Canada welcomes the possibility for the EUCC to extend the use of the Common Criteria standards to all EU Member States (CCRA signatories only include Austria, France, Germany, Italy, the Netherlands, Spain, Canada, the US and other non-EU countries). However, Canada noted its preference in keeping the CCRA coverage and sought the EUCC to maintain the MFN treatment of conformity assessment mutual recognition found in the CCRA (this would prevent the risk that larger countries could begin negotiating better bilateral terms than Canada under the EUCC). Canada also requested more information on the EUCC’s legislative track and the EU’s intention to notify it to the WTO TBT Committee.

   The EU indicated that once the draft implementing regulation to establish the EUCC is finalized, it will be made public and notified to the WTO TBT Committee, and four weeks later discussions will begin with the Member States. Based on the comments received, adjustments will be made. The adoption of the implementing regulation requires a positive opinion from a qualified majority of Member States. The EU reported its goal is to have the draft, with mutual recognition requirements covering a larger scope of measures than those in the CCRA, ready by the second quarter of 2022, but noted that this date has not been confirmed.  It also noted that it envisions discussions with all CCRA level 2 on individual bilateral mutual recognition of conformity assessment.

   The EU is seeking to maintain a certain cohesion in application between the CCRA and the EUCC, where it is possible to do so. In addition, it noted that private companies and Member States are showing a lot of interest in preserving the spirit of the CCRA and that it plans to have a one to two-year transition period once the EUCC comes into effect.  The EU is open to a more detailed discussion with Canada.

7. Measures intended to deal with the risk of carbon leakage including carbon pricing and border adjustment measures (Canada and EU item)

The EU and Canada had an exchange on their respective work to address carbon leakage risks, including border carbon adjustment mechanisms. The EU presented its ongoing work in multilateral fora and cooperation opportunities (e.g., Climate Club) with Canada on this issue. Canada asked for an update on the EU’s Carbon Border Adjustment Mechanism (CBAM) to which the EU presented its tentative timeline. Canada also presented its current work on border carbon adjustments including consultations with stakeholders. Canada and the EU subsequently held a workshop on Carbon Pricing and Border Carbon Adjustments on March 10 and the EU proposed to have a more detailed discussion once the legislative process for the CBAM is complete.

8. Report of the Agriculture Committee meeting and follow-up (Canada and EU item)

Canada provided a report of the Agriculture Committee meeting that was held on November 15, 2021, noting several of the issues discussed such as Canada’s concerns with respect to the EU’s beef and pork TRQ administration and WTO TRQ Article XXVIII Brexit apportionment impact on CETA TRQ volumes. The EU maintained its position that the TRQ existing system is in compliance with the CETA requirements and explained how the quotas are administered. Canada also reiterated its position that the EU uphold its CETA obligations in the context of the WTO Article XXVIII Brexit negotiations on tariff rate quotas. Canada reaffirmed its concerns with the EU’s pesticides, contaminants and veterinary medicinal product regulations which can impact Canadian exports. Canada noted the importance of transition periods to allow sufficient time for producers to adapt to new regulations.

The EU reiterated concerns regarding how the TRQ for cheese was filled. The EU made reference to the detailed comments included in its submissions to the comprehensive review of tariff rate quotas and, in particular, to the fact that high rates of transfers and related transfer costs reflect structural problems in the TRQ management system and fails in its CETA obligation to provide a mechanism by which the TRQ is allocated to operators most likely to use it. Canada provided an update on the Comprehensive Review of Tariff Rates Quota Administration and maintains its position that they are fully meeting its CETA obligations in regard to TRQ administration.

The EU raised its disappointment with the Canadian International Trade Tribunal decision in August 2021 to continue antidumping and countervailing orders against EU sugar, noting that the fundamentals in the EU sugar market changed years before the decision.

Both parties acknowledged the ongoing work and collaboration on the Canada-EU Agriculture Dialogue Workshop series.

9. Report of the Wines and Spirits Committee meeting and follow-up (Canada and EU item)

Canada provided the Committee with a report from the Wines and Spirits Committee meeting that was held January 25-26, 2022 where Canadian provinces and territories were present for the discussion on provincial measures. The parties agreed to move forward with amendments to annexes I, III and IV of the 2003 Agreement on Trade in Wines and Spirits Drinks by way of a decision of the Joint Wine and Spirits Committee.

The parties also discussed the CETA Joint Declaration on Wine and Spirits where they confirmed their commitment to review progress achieved over the first five years of CETA’s provisional application by way of a joint progress report. The EU raised concerns with a range of measures maintained by the provinces, including small producer rates, direct delivery access and reiterated its call to work together within the spirit of the agreement. Canada raised concerns with a range of measures maintained by the EU, including nutritional and energy labelling, some Common Agricultural Policy measures related to wine, and excise rebates for small and independent producers.

The parties agreed that the report would be ready for the meeting of the CETA Joint Committee in the fall of 2022. The next CETA Wine and Spirits Committee is planned for early 2023.

10. A.O.B

1. Removing intra-provincial barrier to trade in Canada: update on the work of the Regulatory Reconciliation and Cooperation Table (EU item)
   Canada presented an overview of the Canada Free Trade Agreement (CFTA) to which the federal government is a Party, noting that internal trade is a priority for the federal government Canada also explained the governance structure and work plan of the Regulatory Reconciliation and Cooperation Table under the CFTA. The EU requested information on whether EU companies and other stakeholders can take part in the consultations launched in this framework and whether there can be any synergies between the work of the RRCT and the CETA Regulatory Cooperation Forum. The EU noted it may reach out to further engage on this issue and that its Delegation in Ottawa would be the main point of contact.
2. MFN withdrawal for Russia and Belarus
   Canada presented its recent action and timeline to remove most-favoured nation (MFN) tariff treatment for imports from Russia and Belarus into Canada in response to Russia’s invasion of Ukraine, supported by Belarus, and asked about plans for similar action from the EU. Both Canada and the EU agreed to remain in contact on this issue at it moves forward, including between Canadian and European Union officials at Missions to the World Trade Organization in Geneva.

11. Next Steps

Canada and the EU agreed to reconvene the CETA Committee on Trade in Goods in early 2023.

Participants:

Canada:

Co-Chair: Executive Director, Tariffs and Goods Market Access Division, Global Affairs Canada
Co-Chair: Director, International Trade Policy Division, Department of Finance Canada
Health Product Compliance, Health Canada;
Technical Barriers to Trade Division, Global Affairs Canada;
Intellectual Property Trade Policy Division, Global Affairs Canada;
Trade Agreements Secretariat, Global Affairs Canada;
Market Access Secretariat, Agriculture and Agri-Food Canada;
Internal Trade, Privy Council Office;
Regulatory Cooperation Directorate, Treasury Board Secretariat; and
Mission of Canada to the European Union

EU:

Co-Chair: European Commission, DG TRADE, Deputy Head of Unit D1
European Commission services: DG Trade (DG TRADE); DG Internal Market, Industry, Entrepreneurship and SMEs (DG GROW); DG Agriculture and Rural Development (DG AGRI); DG Environment (DG ENV), DG Taxation and Customs Union (DG TAXUD), DG Health and Food Safety (DG SANTE), DG Communications Networks, Content and Technology (DG CNECT), DG Justice and Consumers (DG JUST), DG Energy (DG ENER), Delegation of the European Union to Canada