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CETA — Greece’s saviour?

It is in the EU and Canada’s benefit to see the Greek economy recover, argues Constantine Passaris.

By: /
2 December, 2014
By: Constantine Passaris
Professor of Economics at the University of New Brunswick

The Canada-European Union leaders’ summit in September marked the near-end of a long and arduous journey of trade negotiations that began in 2009. The release of the official text of Canada-EU Comprehensive Economic and Trade Agreement (CETA), which runs over 1,600 pages, confirms Canada’s reputation as a world leader in crafting international free trade agreements — and with the indication over the weekend that Germany will not object to CETA, it is now sure to go ahead.

There is no denying that CETA sets a new gold standard for international trade agreements. It’s a state-of-the-art agreement that pushes the envelope in terms of its comprehensive nature and ambitious outreach. There is no contemporary bilateral or multilateral free trade deal that embraces so many economic, trade and investment issues under the umbrella of one collective agreement.

One of its more innovative features is its investor-state dispute settlement mechanism, which allows corporations the right to sue for damages incurred from new legislation that adversely affects its profitability. Overall, CETA can serve as a new template for trade agreements that include intellectual property, genetically modified organisms and investor-state dispute settlements. These are areas of economic engagement that have never been covered by previous international trade agreements.

The EU, despite its contemporary economic challenges, remains one of the most lucrative and desirable markets in the world — and one that will be more accessible to Canada under CETA. The EU is the world’s largest single market, with 28 member countries, a combined population in excess of half a billion people and a total GDP in excess of 13 trillion euros. Gaining greater access to this lucrative free trade zone will help create more private sector initiatives, business opportunities and jobs on both sides of the Atlantic.

The agreement is expected to increase EU-Canada trade in goods and services by 23 percent and increase the EU’s GDP by about 12 billion euros a year. It will eliminate all industrial duties, saving European exporters about 470 million euros a year.

For the EU, CETA comes at a time when the European continent is mired in a protracted economic recession and a sluggish economic recovery. In this context, CETA is an opportunity for renewed economic prosperity on both sides of the Atlantic.

But it will also benefit one country that has been at the centre of European financial woes, and whose stability might go a long way in helping to reset the regional economic balance — Greece.

As a member of the European Union, Greece is in an excellent position to take advantage of this remarkable economic opportunity, at a time when its economy is beginning to recover but could use that extra help. CETA can provide Greece with a venue to further develop its economic relationship with Canada and contribute towards expanding trade, attracting investment, creating jobs and growing the Greek economy.

If Canada can use international trade to fuel its economic prosperity, so can Greece. The list of industries where Greece stands to gain from this trade agreement is long and diverse. It includes plastics, chemicals, tools, appliances, iron and steel products, agricultural products, dairy products, wines and spirits, ceramic and glassware, cosmetics and jewelry, all areas where Greece has a competitive advantage and an internationally recognized brand.

CETA also provides Greece with new opportunities for trade with Canada in new sectors of its economy such as international services, information technology programs and software. The agreement could open the door for Greek businesses to bid for Canadian government contracts. Indeed, it could be an opportunity to revive Greece’s declining industrial sector.

Why should Greece care about CETA at a time when it is facing major economic problems such as its fiscal challenges, high unemployment and economic stagnation? The answer to that question speaks to the role of international trade in the new global economy.

International trade can be a model for growing the Greek economy, increasing government revenues, creating new job opportunities, attracting foreign direct investment, knowhow and expertise, and creating new revenue streams to support social programs in Greece.

Greece and Canada have a long and amicable history of working together on social, cultural, political and economic issues. For many generations, Greeks have arrived in Canada as immigrants. These Greeks of the diaspora have a significant presence in Canada. At the present time there are in excess of a quarter of a million Canadians of Greek heritage that live and work and raise their families in Canada. In this context, Greek Canadians are an important economic bridge and a strategic economic asset linking these two countries.

CETA could not have come at a better time for Greece. As Greece moves beyond its austerity program and focuses on growing the national economy, attracting foreign investment and creating jobs, CETA can become one of the foundation stones for a more prosperous future for Greeks and a more vibrant and dynamic domestic economy for Greece.

A free trade agreement is simply an economic opportunity. It is not a guarantee of economic success. It opens the door for enhanced trade opportunities with another country in this case, Canada, one of the world’s most coveted export destinations. What will transform this economic opportunity into a business success story will be the vision and smarts of Greek entrepreneurs and the competitiveness of Greek products and services in terms of quality and price. In the new economy, success depends on our smarts, our global mindset and our productive enterprise. Global engagement through international trade is the wave of the future and the defining feature of the new economy.

At the end of the day, Greece’s exports will be granted unrestricted and preferential access to the Canadian domestic market — one of the most lucrative consumer markets in the world. The removal of the economic burden of tariffs will make Greek exports even more competitive in Canada. In fact, CETA offers an added bonus. Since Canada is a member of NAFTA, Greek products will have access to the whole North American market that includes the U.S. and Mexico.

In short, CETA allows Greece to start writing a new chapter in its modern economic history, which in turn helps to stabilize the recently tumultuous European economy. This international trade agreement should serve as a catalyst and a strategic tool for Greece’s economic development. An economic development plan that embraces expanding Greek exports, growing the domestic economy, creating new job opportunities for young men and women in Greece and attracting foreign direct investment from Canada.

Looking forward, the CETA ratification process follows a prescribed course which will take a few more years for final ratification. The text the leaders agreed upon in September will be translated into all the EU official languages. It will then follow the process for ratification by the Canadian Parliament and the EU, which is anticipated to be completed sometime in 2016.

Finally, as it is a mixed agreement there will be elements that will need to be ratified by member-state parliaments, which could take another two to four years. In short, Greece has not had the opportunity to ratify it, but as its government contributed to the negotiations, like all other member-states, it supports the agreement reached in September.

Once the EU and Canada ratify the agreement, certain provisions will come into effect immediately. However since this is a complex agreement, some of the clauses will be implemented over a period of a few years.

The common currency zone of the EU prescribes that the stability of the whole is intricately linked to the stability of each, and vice-versa. While Greece represents less than two percent of the European GDP, had it defaulted on its loans to creditors (as was a high risk in the 2010-2012 period) it would have had major negative impacts on the common currency zone member-states as a whole. Likewise, if Europe were to enter a period of economic stagnation, Greek exports to other member-states would be adversely affected.

Considering then all indicators point to CETA going forward, proponents of a strong and integrated economy between Greece, Canada and the EU should celebrate.

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