Canadian recognition of EU safety standards, more exports from Canada to Europe part of CETA

That French car you’ve wanted for so very long may be a possibility once a detailed free trade agreement between Canada and Europe is ratified in about two years time.

The agreement, announced in principle in Brussels today by Canadian Prime Minister Stephen Harper and European Commission President Jose Manuel Barroso, has a number of positive changes for the automotive sector from both industrial and enthusiast standpoints.

While the details of the Comprehensive Economic and Trade Agreement (CETA) are sealed as lawyers still need to go over the language, both parties have revealed some interesting details of the agreement.

What Canada Gets From Europe

All free trade agreements are a give-and-take affair. Due to Canada’s high ratio of exports (85-percent of passenger vehicles built in Canada are exported to other markets), it should be no surprise most of the benefits Canada will see have to do with opening up the European market to Canada-built vehicles and automotive parts.

From Government of Canada:

The automotive sector is a key driver of Canada’s economy and employs more than 115,000 highly skilled Canadians across the country. The Canadian auto industry is highly dependent on trade, with around 85 per cent of auto production exported every year. CETA provides historic new market access opportunities for the automotive sector and will allow significant increases of exports to Europe. The removal of tariffs along with flexible rules of origin will benefit vehicle and auto parts producers alike.

For passenger vehicles, the EU’s 10 per cent tariff will be eliminated, providing Canada’s auto makers with a competitive advantage in the EU market that few other countries have.

CETA will also benefit Canada’s lucrative auto parts sector, not only because the sector will be incorporated into the Agreement, but also because CETA will eliminate EU tariffs on auto parts, which run up to 4.5 per cent. This means that Canadian auto parts producers will have an important advantage over competitors in other countries.

In addition, CETA includes rules of origin which reflect Canada’s place within the integrated North American automotive industry. These provisions are designed to work with Canada’s existing supply chains and allow for up to 100,000 passenger vehicles to be exported to Europe, a twelve-and-a-half fold increase from our current average exports. At the same time, CETA encourages “made in Canada” production by granting unlimited preferential treatment to vehicles with higher Canadian content that are exported to Europe.

Finally, CETA includes forward looking provisions that allow for the adjustment of the rules of origin to provide additional flexibility in the event that the EU strikes free trade deals with other countries, such as the United States. Taken together, the CETA rules of origin give Canadian producers the opportunity to export to the EU market on a preferential basis now and in the years to come.

What Europe Gets From Canada

There is one major concession Canada has given the European Union and it could make things very interesting for car enthusiasts.

From European Commission:

Automotive sector – Canada will recognise a list of EU car standards and will examine the recognition of further standards. This will make it much easier to export cars to Canada.

And What Does This Mean For Us Car People

While 100,000 units does not seem like a massive number (Nissan produces around 500,000 vehicles per year in Tennessee), it is still significantly more than the 8,000 units the Canadian government currently says they are allowed to export.

The biggest change will be in tariffs. Manufacturers from Europe will (hopefully) be able to sell their vehicles for less in Canada, allowing more customers to purchase European produced vehicles. The same will be true for vehicles built in Canada for export (the Ford Edge is expected to be sold globally soon, built in Ontario).

However, the recognition of car standards will be the big money saver for European manufacturers and opens the door for vehicles like the Volkswagen Scirocco to be sold in Canada without having to meet certain Canadian vehicle standards.

We’ll have more on this as it develops.

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