Italian Chamber of Commerce in Canada West | A few more observations on CETA
Italian Chamber of Commerce in Canada West
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01 Aug A few more observations on CETA

Paolo Quattrocchi*

At the same time and following the entry into force of CETA, heavy criticism has grown towards the economic-commercial agreement between Canada and the EU. Leaving aside other criticisms, such as those relating to the investment industry (which is not in provisional implementation), the attention seems to focus on:

a) the dreaded invasion of Canadian products harmful to public health (toxic molds and herbicides, hormone-treated meat, carcinogenic grain, etc., etc.),

b) the failure to include all Italian quality products recognized as Geographical Indications and ultimately, however,

c) the insufficient level of protection recognized in Canada for (IIGG) products included in CETA.

 

A) THE DREADED INVASION OF CANADIAN PRODUCTS

Let’s start from the grain.

Whether we like it or not Italy, for many years, was the first world importer of Canadian wheat. Whether we like it or not, then, pasta and other products derived from the processing of grain of which we fed, until 2017, they were produced, in fact, with Canadian wheat.

The CETA therefore did not have, as erroneously claimed, nor will have implications on wheat purchases from Canada, purchases that have always occurred, in very high quantities, even before the CETA.

The Canadian wheat, in fact, by virtue of a complex mechanism of calculation, which takes into account the value of wheat production, worldwide and Community and freight charges, has been imported into the EU at zero duty since 2014, since EU, with the Regulation n.147 of 14 February 2014, has ordered the aforementioned exemption. The situation in Italy was well known and already in 2015, apart from any considerations on the toxicity or not of the Canadian wheat, we lived with a certain disappointment that while the wheat was entering into Europe at zero duty, pasta, produced in Italy with that grain, it was subjected to the imposition, in the entry to Canada, of a duty that, depending on the products, could reach even 10%: that said, therefore, there is no relationship between the import of Canadian wheat (toxic or non-toxic) and CETA.

Moreover, since the CETA entered into force, Canadian wheat sales to Italy have plummeted, falling by 90%: from CAD 446 million in 2015 to CAD 321 million in 2016 to CAD 173 million in 2017 (exports of Canadian durum wheat to Italy have more than halved over 3 years).

Then should we say that CETA played a bad trick to Canada? No. Just a simple consideration, which is valid for wheat as for all products, food industry and not: a free trade agreement does not involve purchase obligations; it only tends to favor trade because the products, freed from duties or other non-tariff barriers, maintain their competitiveness: it is a simple rule of the free market.

The Canadian wheat, which since 2014 entered zero duty tariffs, today (CETA or not CETA), has remained at zero duty, but it no longer arouses the interest of Italian importers, whether for better internal productivity, or for the propensity Italian importers to turn to other markets, or for the results of a late but effective propaganda: and then, the CETA has neither merits nor guilt.

As for other Canadian products considered dangerous, it is necessary to read carefully the agreement which reiterates a principle that CETA cannot remove, that is to say that, CETA or not CETA, in Europe (and Canada) cannot be imported products which do not comply with the respective applicable laws and that each of the parties will remain free to legislate on the basis of the standards it deems appropriate to adopt, without these regulations being able to hinder trade.

It is up to each party to monitor their borders to ensure that products do not comply with their respective regulations do not enter their respective markets.

 

B) FAILURE TO INCLUSION OF ALL ITALIAN IIGG

So far, some high quality Italian products, such as Prosciutto di Parma, could not be sold in Canada under their own traditional designation of origin. The reason for this ban was due to the fact that in Canada – unlike in Europe – there was not, even for food products, special legislation protecting geographical indications and designations of origin, beyond what provided for by the general rules on trade marks: that is to say, if for a given denomination (even including a foreign geographical indication) a mark had been obtained on a regular basis, that denomination could be used exclusively, even to the detriment of products genuinely originating in the geographical area to which the designation he was referring to. Because of this the case had occurred (this is precisely the case of Prosciutto di Parma) that some Canadian producers, although in compliance with the national law, had registered, as trademarks, the names of products protected in Italy as geographical indications, thereby creating an evident conflict situation. On the other hand, those same Canadian products, which had appropriated names protected in Europe as IIGG, could not be sold in the old continent.

It is clearly a stalemate: the Italians could not sell their excellence in Canada, the Canadians could not sell their products in Europe using names inspired by European (Italian).

 

Given this initial situation, what did the CETA?

At the end of the negotiations, Canada, abdicating in part to its legislation, accepted, recognizing them as deserving of maximum protection, 41 italian IIGG that, previously excluded from the Canadian market, today are free to enter the shelves of the Canadian zero duty distribution. What happens to Canadian products using names inspired by European (Italian) products? Can they enter the European market? No, they will not be allowed to enter because they violate the rules set out in Europe to protect the IIGG.

In conclusion, while 41 Italian products that previously did not have access to the Canadian market today can be and are in fact sold in Canada at zero duty, Canadian products, which use names inspired by Italian ones, cannot be sold in Europe.

It is argued by some commentators that the number of IIGG recognized by CETA does not include all the Italian IIGG recognized in Europe; it is more or less an additional 200 IIGG: That’s just it. The Italian IGGs protected by CETA are less than those recognized in Europe.

It is also true, however, that on the one hand, the commercial value of the recognized IIGG is equal to 90% of the value of all Italian IIGGs, on the other it is also true that CETA is an open agreement in the sense that until ratification it is possible to include other IIGGs in the list that should be considered of such importance as to make them deserving of a similar protection to that of better known products and therefore with a greater market value.

What does it mean? It means that in Italy, and probably also in Europe, products such as volume, notoriety, diffusion and penetration capacity on the domestic and international market do not seem to be particularly significant. Many of them belong to a niche that, as such, make them known only to a very small circle of super experts in the field. With this we do not want to minimize the intrinsic value, neither in terms of originality and quality, nor for the meaning that these products have for the Italian tradition and culture; we only intend to reflect on how strong, in foreign markets, the perception and the interest in those products is and how high the level of international value and notoriety and therefore the risk of appropriation of the denomination that the aforementioned goods can risk. Moreover, these IIGGs, pending an unforeseen international coordination between the systems of protection of trademarks and IIGG, could well protect themselves in the Canadian market with alternative and very low cost systems. 

Economic agreements are tradeoffs to achieve them, perhaps, in some cases, you need to do some small or great sacrifice, taking into account of the other’s sacrifices.

 

C) PROTECTION IN CANADA OF ITALIAN IIGG RECOGNIZED BY CETA

However, the protection provided for the Italian IIGGs recognized by CETA would not be sufficient.

Trying to maintain the maximum objectivity is observed: until the entry into force of CETA, Prosciutto di Parma, just to give an example, could not be sold or better, could be sold (as in fact it was sold), but could not use its own name: it was in fact sold with another, generic name that naturally could not allow the product to be marketed at a price consistent with its value, nor allowed the enhancement of the denomination. Today, not only Prosciutto di Parma and many other products whose export value is very high, can be sold with its own denomination at zero duty, with the application of a price consistent with the quality that the product expresses, but all those who used (according to Canadian law) similar names, may continue to use that similar name (it would be difficult to remove the right to use a name acquired legitimately on the basis of current Canadian legislation), but will no longer be able to use indicators – adjectives, images, definitions – that recall the (wrongly assumed) Italianness of that product that is anything but “Italian”.

For European (and Canadian) negotiators it would have been very difficult to do more, but even in this case, if you want to go back to discussing, negotiating, you can do it: we said that CETA is an open agreement, the tools to do it are there and, perhaps, even the availability, but without taking into account that, on the one hand, the advantages of the European producers have already obtained many, on the other hand, each new concession could have its own price that could not necessarily fall back into the same sector, with all due respect to the sector which could then be penalized. However, Italy remains obviously free not to ratify.

What are the consequences of a non-ratification in the agri-food sector?

Apart from all the procedural complexities linked to non-ratification, on which we will say on another circumstance, with the uncertainties that could derive general trade relations with Canada, the Italian products of excellence will no longer be sold (the IIGG) with the their traditional denominations; the amount of cheese that can be exported to Canada will be reduced, as it can no longer benefit from the increased import quota provided by CETA; Italian wines (which are already benefit from a reduction in duties and for which in 7 years would come at zero duty) will keep import tariffs in Canada.

 

CETA DOES NOT CONCERN ONLY THE AGRI-FOOD INDUSTRY

Moreover, and without thereby diminishing the importance of the sector in question, CETA does not only deal with agri-food products.

 

Machinery sector

In fact, CETA deals with all the product sectors and also intervenes on non-tariff barriers, opening up to the European markets that have been closed up to now or, in some way, penalized. Without claiming to be exhaustive, it seems necessary to remember, that with CETA, for example, the obstacle that penalized the export of machinery from Europe to Canada has been removed, namely the need to have more product certifications with all the risks, complications, delays and costs involved. Taking into account the needs of Canada in relation to the potential growth that the North American country wants to maintain (and increase) and the strong similarities between the Italian and Canadian production structures, both characterized by a preponderant number of small and medium-sized companies, it will be easy to understand how strong are the potential growth for Italian entrepreneurs in the machinery sector, which, for a total value of exports of $ 8152 million CAD, holds a 24% stake, with a value equal to $ 1949 mln CAD.

 

Calls to tender for goods and services

And again, with CETA, European companies will be able to participate in calls tendersfor goods and services, at every levels (federal, provincial and metropolitan) in a growing country like Canada (for the first years among the G7 countries for growth rate) means to have enormous expansion spaces.

Besides, in the field of tender, CETA has fully implemented the European legislation on the subject, which, beyond the obvious difficulties inherent in a sector such as procurement, cannot help European (Italian) entrepreneurs; There is more to be said, for example for the new rules on the regulation of intellectual property which are going to have a significant impact on the pharmaceutical sector and bio-medical instruments, but it is not possible to examine the whole CETA.

A reflection is spontaneous: Canada has 36 million inhabitants, Europe 500 million, the disproportion is evident. Perhaps it should be the Canadians who are worried about having to deal with a big and fierce market like the European one, not the other way round.

 

PARTNERSHIP AND COOPERATION AGREEMENT

Reading that the CETA would not guarantee the protection of democracy, the environment and the rights in general leaves us dumbfounded.

Evidently, on the other hand, it is omitted to consider that CETA is the economic part of a much broader strategic cooperation agreement signed by the EU and Canada, which sees its instrument in the Strategic Partnership Agreement.

In 34 articles, the EU and Canada reiterated and formally committed themselves to the common effort to defend and share the principles of protection of human rights, fundamental freedoms, democracy, legality, peace and international security, the protection of environment and sustainable development, through constant dialogue, through consultation procedures and permanent commissions that are always active, with the aim, among other things, of adapting the regulations, so as to create an ever closer and more effective liaison.

But there is more than nice words: as early as 2017, the EU and Canada signed, under the SPA, a memorandum of understanding on cyber security through the sharing of security procedures for the exchange and protection of classified information.

In recent months Canada has been presented and treated in Italy almost as a “rogue country”. Forgetting what Canada has done for Italy during the Second World War and forgetting, just for a brief moment, the millions of Italians who have contributed, with enormous sacrifices, to make that country great and that today they look to Italy astounded compared to so much hostility and all that is happening. For those who know Canada and its way of being – quiet and discreet -, with its record in social policies, protection of the environment and health, protection of civil rights (minorities, women, gender, religious beliefs), of the extraordinary international commitment to support the neediest countries and the peace and humanitarian missions, provokes, after an initial reaction of dismay, a bitter smile mixed with disbelief, irony, embarrassment and melancholy.

 

*Equity Partner of NCTM Law Firm, 

Vice President ICCCW, 

Director of Centro Studi Italia-Canada


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