eu-canada sia draft final report...

EUCanadaSIAdraftFinalReport

1


2


3

ThisreportwascommissionedandfinancedbytheEuropeanCommission.TheviewsexpressedhereinarethoseoftheContractor,anddonotrepresentanofficial

viewoftheCommission.

PROJECTWEBSITEANDFEEDBACK

FeedbackandcommentsonthedraftFinalReportandontheproject in general is strongly encouraged and canbe sent tothestudyteambyvisitingwww.eucanadasia.org

ThedeadlineforfeedbacktobeincludedintheFinalReportis11April2011.


4

EUCanadaSIAdraftFinalReportTeam:

ColinKirkpatrick,PhD,TeamLeader

SelimRaihan,PhD,CGEandFDIgravityequationsmodeller

AdamBleser,sectoraleconomicandsocialimpactsexpert

DanPrudhomme,selectcrosscuttingissuesexpert

KarelMayrand,sectoralenvironmentalexpertonNorthAmerica

JeanFrdricMorin,PhD,IPRexpert

HectorPollitt,E3MGmodellingteam

LeonithHinojosa,PhD,sectoralenvironmentalexpertonEU,otherthirdcountriesexpert

MichaelWilliams,labourmobilitysectionandresearcher

Contactinformationand/oraffiliationsinorder:Dr.ColinKirkpatrick:([email protected])Dr. Selim Raihan: Associate Professor, Department of Economics at University of Dhaka ([email protected]),ExecutiveDirector,SouthAsianNetworkonEconomicModelling(SANEM)

AdamBleser:DEVELOPMENTSolutionsDanPrudhomme,IPAWorldwideGroup([email protected]),DEVELOPMENTSolutionsKarelMayrand:seniorexperttotheteamDr.JeanFrdricMorin:UniversitLibredeBruxellesHectorPollitt:CambridgeEconometrics([email protected])Dr. Leonith Hinojosa: Open University, Honorary Fellow at the IARC/SED University of Manchester([email protected])MichaelWilliams:DEVELOPMENTSolutionsTheviewsoftheauthorsexpressedhereinaretheirownanddonotnecessarilyreflecttheviewsoftheiraffiliatedinstitutions.


5

TableofContents

EXECUTIVESUMMARY..............................................................................................................................14

1.INTRODUCTION.....................................................................................................................................22

1.1EUCanadaComprehensiveEconomicandTradeAgreement..........................................................22

1.2EUCanadaSustainabilityImpactAssessment..................................................................................22

2.METHODOLOGY.....................................................................................................................................26

2.1Introduction:EvidencebasedApproach..........................................................................................26

2.2.Indicators.........................................................................................................................................26

2.3Evidence............................................................................................................................................28

2.3.1.ModellingApproach..................................................................................................................28

CGEModel......................................................................................................................................28

E3MGModel...................................................................................................................................30

InvestmentModelling.....................................................................................................................31

2.3.2Deskresearch.............................................................................................................................31

2.3.3Stakeholderconsultations.........................................................................................................31

2.4Analysis.............................................................................................................................................33

2.5PolicyRecommendations..................................................................................................................35

SUSTAINABILITYIMPACTASSESSMENTS...................................................................................................36

3.MacroEconomicAssessment...............................................................................................................36

4.Agriculture,ProcessedAgriculturalProducts(PAPs)andFisheries......................................................42

4.1EU&CANADA...................................................................................................................................44

4.1.1Agriculture&PAPs.................................................................................................................44

ECONOMICASSESSMENT................................................................................................................44

SOCIALASSESSMENT.......................................................................................................................71

ENVIRONMENTALASSESSMENT.....................................................................................................78

4.1.2Fisheries.................................................................................................................................85


SOCIALASSESSMENT.......................................................................................................................88

ENVIRONMENTALASSESSMENT.....................................................................................................91

4.2USA,MEXICO&OTHERTHIRDCOUNTRIES......................................................................................92

5.IndustrialProductsAssessments...........................................................................................................98

5.1.EU&CANADA..................................................................................................................................98

5.1.1.Mining&MetalManufacturing............................................................................................98


6


SOCIALASSESSMENT.....................................................................................................................105

ENVIRONMENTALASSESSMENT...................................................................................................114

5.1.2.Oil&Petroleumproducts...................................................................................................124

ECONOMICASSESSMENT..............................................................................................................124



5.1.3.Coal.....................................................................................................................................138




5.1.4.ForestBasedIndustries......................................................................................................146




5.1.5.Automotive&OtherTransportationEquipment................................................................157




5.1.6Textiles.................................................................................................................................167




5.2.USA,MEXICO&OTHERTHIRDCOUNTRIES...................................................................................176

6.ServicesSectorAssessments...............................................................................................................184

6.1.EU&CANADA................................................................................................................................184

6.1.1.TransportationServices......................................................................................................187




6.1.2.TelecomServices.................................................................................................................204




7


6.1.3.Financialservices................................................................................................................211




6.1.4.BusinessServices.................................................................................................................220




6.2.USA,MEXICO&OTHERTHIRDCOUNTRIES...................................................................................232

7.CROSSCUTTINGISSUES.......................................................................................................................235

7.1PUBLICPROCUREMENT..................................................................................................................235

7.1.1.EU,Canada,andUSA..................................................................................................................237




7.1.2.MEXICO.......................................................................................................................................292

7.1.3.OTHERTHIRDCOUNTRIES...........................................................................................................293

7.2.INTELLECTUALPROPERTYRIGHTS(IPR).........................................................................................294

7.2.1CANADA.......................................................................................................................................294




7.2.2.EU................................................................................................................................................305



ENVIRONMENTALIMPACTS..........................................................................................................307

7.2.3.USA..............................................................................................................................................307







8



7.3.INVESTMENT..................................................................................................................................310

7.3.1.EU,Canada,USAandMexico......................................................................................................312





7.4.TRADEFACILITATION.....................................................................................................................360

7.4.1.CANADA&EU.............................................................................................................................360




7.4.2.USA,MEXICO&OTHERTHIRDCOUNTRIES................................................................................366

7.5.LABOURMOBILITY.........................................................................................................................368

7.5.1.CANADA&EU.............................................................................................................................368





7.6.FREECIRCULATIONOFGOODS......................................................................................................378

7.6.1.CANADA&EU.............................................................................................................................378





7.7.COMPETITIONPOLICY....................................................................................................................383

7.7.1.CANADA&EU.............................................................................................................................383




7.7.2.US,MEXICO&OTHERTHIRDCOUNTRIES...................................................................................392

8.PolicyRecommendations....................................................................................................................394


9

8.1Overview.........................................................................................................................................394

8.2ListofMajorImpacts......................................................................................................................394

8.3.Recommendations.........................................................................................................................400

8.3.1TradeMeasures.......................................................................................................................400

8.3.2Cooperationmeasures.............................................................................................................406

References...............................................................................................................................................409


10

LISTOFABBREVIATIONS

AGP AgreementonGovernmentProcurementAIT AgreementonInternalTradeATC AgreementonTextilesandClothingAVMSD AudiovisualMediaServicesDirectiveBIT BilateralInvestmentTreatyBOD BiochemicaloxygendemandBRIC Brazil,Russia,IndiaandChinaBSE BovinespongiformencephalopathyCAMSC CanadianAboriginalMinoritySupplierCouncilCAP CommonAgriculturalPolicyCBA CanadianBankersAssociationCCA CausalchainanalysisCDC CanadianDairyCommissionCDE ConstantdifferenceofelasticityCDIA CanadianDirectInvestmentAbroadCEC CommissionforEnvironmentalCooperationCERT CanadaEURoundTableCES ConstantElasticityofSubstitutionCETA ComprehensiveEconomicandTradeAgreementCFA CommitteeofFreedomofAssociationCFIA CanadianFoodInspectionAgencyCFP CommonFisheriesPolicyCGE ComputableGeneralEquilibriumCITT CanadianInternationalTradeTribunalCLS CoreLabourStandardsCOSEWIC CommitteeontheStatusofEndangeredWildlifeinCanadaCSR CorporateSocialResponsibilityCSRA CanadianSecuritiesRegulatoryAuthorityCSTO CanadianSecuritiesTransitionOfficeCUSFTA CanadaUSFreeTradeAgreementCWB CanadianWheatBoardDFAIT DepartmentofForeignandInternationalTradeDG DirectorateGeneralDWA DecentWorkAgendaECTI EUCanadaTradeInitiativeEEC EuropeanEconomicCommunityEESC EuropeanEconomicandSocialCommitteeEEZ ExclusiveEconomicZoneEFTA EuropeanFreeTradeAssociationEMU EconomicandMonetaryUnionENGO EnvironmentalnongovernmentalorganisationFARA FederalAcquisitionReformActFAR FederalAcquisitionRegulationFASA FederalAcquisitionStreamliningActFATS ForeignAffiliateTradeinServicesFBT Food,beverageandtobacco


11

FDI ForeigndirectinvestmentFFN FunctionalfoodsandnutraceuticalFIAS FinancialinformationandadvisoryserviceFIPA ForeignInvestmentPromotionandProtectionAgreementFQD FuelQualityDirectiveGATS GeneralAgreementonTradeinServicesGDP GrossDomesticProductGHG GreenhouseGasEmissionsGI GeographicalindicationsGM GeneticallymodifiedGP GovernmentprocurementGPA GovernmentProcurementAgreementGTAP GlobalTradeAnalysisProjectGVA GrossvalueaddedHACCP HazardAnalysisandCriticalControlPointsHS HarmonisedsystemICA InvestmentCanadaActIEA InternationalEnergyAgencyILO InternationalLabourOrganizationIMF InternationalMonetaryFundIMO InternationalMaritimeOrganizationIPR IntellectualpropertyrightsISDS InvestorstatedisputesettlementJCC JointCooperationCommitteeLDC LeastdevelopedcountryLICO LowincomecutoffLULUCF Landuse,landusechangeandforestryM&A MergerandacquisitionsMASH Municipalities,academicinstitutions,schoolboardsandhospitalsMFN MostfavourednationMLC MaritimeLabourConventionMMS MaritimeModalScheduleMNC MultinationalcorporationMNE MultinationalenterpriseMOU MemorandumofUnderstandingMRA MutualrecognitionagreementMS MemberStateNAFTA NorthAmericanFreeTradeAgreementNAMA NonagriculturalmarketaccessNC NetcostNEC NotelsewhereclassifiedNGO NongovernmentalorganisationNPE NonylphenolanditsethoxylatesNPRI NationalPollutantReleaseInventoryNROP NonResidentOwnershipPolicyNTB NontariffbarrierOCT Overseascountriesandterritories


12

OECD OrganisationforEconomicCooperationandDevelopmentOIE WorldOrganisationforAnimalHealthPA PreferentialagreementPAC PolycyclicaromaticcompoundsPAP ProcessagriculturalproductPGM PlatinumgroupmetalPM ParticulatematterPMPRB PatentedMedicinesPriceReviewBoardPNAS ProceedingsoftheNationalAcademyofSciencesPSAB ProcurementStrategyforAboriginalBusinessesPWGSC PublicWorksandGovernmentServicesCanadaRAMP RegionalAquaticsMonitoringProgramREACH Registration,Evaluation,AuthorisationandRestrictionofChemicalsREE RareearthelementsROO RulesofOriginRVC RegionalvaluecontentSAGD SteamassistedgravitydrainingSARA SpeciesatRiskActSAWP SeasonalAgriculturalWorkerProgramSCM SteeringCommitteeMeetingSCO SyntheticcrudeoilSIA SustainabilityImpactAssessmentSITC StandardInternationalTradeClassificationSME SmallandmediumsizedenterpriseSOP StandardoperatingprocedureSPS SanitaryandphytosanitarySTRI ServicesTradeRestrictivenessIndexTAA TradeAgreementsActTAC TotalallowablecatchTBT TechnicalbarriertotradeTEU TwentyfootequivalentunitTFEU TreatyontheFunctioningoftheEuropeanUnionTFWP TemporaryForeignWorkerProgramTIEA TradeandInvestmentEnhancementAgreementTILMA Trade,InvestmentandLabourMobilityAgreementTOR TermsofreferenceTPM TotalparticulatematterTPRP TelecomPolicyReviewPanelTRIPS TradeRelatedAspectsofIntellectualPropertyRightsTRQ TariffratequotaTSE TransmissiblespongiformencephalopahtiesTSIA TradeSustainabilityImpactAssessmentTV TransactionvalueUECBV EuropeanLivestockandMeatTradersUnionUNESCO UnitedNationsEducational,ScientificandCulturalOrganizationUPOV UnionforProtectionofNewVarietiesofPlantsVA Valueadded


13

VAT ValueaddedtaxVOC VolatileorganiccompoundVNM ValueofnonmembermaterialsWEF WorldEconomicForumWIPO WorldIntellectualPropertyOrganizationWMI WhitehorseMiningInitiativeWTO WorldTradeOrganization


14

EXECUTIVESUMMARYThis draft Final Report for the EUCanada Sustainability Impact Assessment (SIA) on the EUCanadaComprehensiveEconomicandTradeAgreement (CETA)providesa comprehensiveassessmentof thepotential impactsof trade liberalisationunderCETA.The impactanalysis looks indetailateconomic,socialandenvironmental impacts in3 sectorsand16 subsectors;and reviews7crosscutting issues.Notonlydoesthereportconsidertheeconomic,socialandenvironmentaleffectsontheEUandCanadaacrossarangeof indepth indicators,but italsoassessesthepotential impactsontheUS,Mexicoandothercountries/regionsincluding,amongothers,avarietyofdevelopingcountries.

Thereareeightmainsectionsofthisreport.SectiononeprovidesanintroductiononthestateofplayoftheSIAandoutlinesnextsteps incompletionofthestudy(byapproximatelyApril2011).Section twooutlinesthemethodologyimplementedtodateandbuildsontheoverviewinSectiononeonnextstepstobetakenincompletingtheSIA.

Sectionsthreetosevencontainthecoreofthisreport:anassessmentofthepotentialeconomic,socialandenvironmental impactsoftrade liberalisationundertheCETA.Themacroeconomicassessment isincluded in section three and briefly discusses overarchingmacroeconomic impacts on the EU andCanadaaspredictedby theCGEmodel,whilealso includingbriefmacrodataon thirdcountries.Thesectoralassessmentsareincludedinsections4through6andprovideindividualimpactassessmentsfor3sectorsand16subsectors:theagriculturalandprocessedagriculturalproducts (PAPs)and fisheriessector (and the subsectorsof (i)grainsandoilseeds, (ii)beefandpork, (iii)dairy, (iv)beverages, (v)otherPAPs,and (vi) fisheries); the industrialproducts sector (and the subsectorsof (vii)miningandmanufacturing ofmetal, (viii) oil and petroleum products, (ix) coal, (x) forestbased industries, (xi)automotive and other transport equipment and (xii) textiles); and the services sector (and the subsectorsof(xiii)transportation,(xiv)financial,(xv)telecommunication,and(xvi)otherbusinessservices).Section seven assesses crosscutting issues and provides individual impact assessments for 7 issues:government procurement, intellectual property rights, investment, trade facilitation, labourmobility,freecirculationofgoods,andcompetitionpolicy.Sectioneight liststhepolicyrecommendations,alsocalledflankingmeasures,basedontheresultsofthesustainabilityanalyses.Thesemeasurescoverbothenhancement and preventative/mitigationmeasures, i.e.measures needed to reinforce key positivesustainabilityimpactsandtopreventoratleastmitigatemajornegativesustainabilityimpacts.Theannexesare located ina separatedocument (available fordownloadalongside this report),andincludeafurthermethodologicalexplanationoftheCGEmodel,E3MGmodelandgravitymodelsaswellas resultsof thesemodels;and informationonconsultationsundertaken todateand thestakeholdernetwork.KEYFINDINGSFROMTHEDRAFTFINALIMPACTASSESSMENT:Macroeconomicassessment:

TheCETAisexpectedtoleadtooverallgainsinwelfare,realGDP,totalexports,thebalanceoftradeandwages inbothCanadaand theEUoverthe longterm.Basedonmodellingresults,thesegainswillbemaximisedunderanagreementthatoffersthehighestdegreeofliberalisation.

Specifically, themodellingestimates that theEUwillexperience increases in its realGDPof0.02% to0.03%over the longterm,whileCanada isestimated to see increases ranging from0.29% to0.36%.Increasesintotalexportsarealsoexpectedoverthelongterm,rangingfroma0.07%increaseintheEU


15

to1.56% inCanada.These increases inexportsareexpected to improve thebalanceof trade inbothCanadaandtheEU,withCanadalikelytoseethegreatestimprovementsfromtheremovaloftariffsandtheEUfromtheremovalofbarrierstotradeinservices.InbothCanadaandtheEU,theCETAissimilarlyexpectedtoleadtoincreasedwages.Whereasincreasesinwagesshouldbefairlycomparablebetweenskilled and unskilled labour in the EU,modelling results suggestwage rates for unskilled labour inCanadawillexceedincreasesforskilledlabour.

ThirdcountriesareestimatedtoexperienceminordegreesofwelfarelossasaresultoftheAgreement,thoughtheoverallimpactonthesecountriesisinsignificant,withGDPprojectedtoexhibitnonoticeablechange.

MacroeconomicresultsareestimatedtodiffersignificantfromthosegeneratedbyasimilarmodellingapproachusedintheEUCanadaJointStudy(2008).Despiteusingthesameassumptionsregardingcutsin tariffs and liberalisation of services, this study estimates far less pronounced gains in real GDP,welfareandexportsoverthelongterm.

Sectorallevelassessment:

ThesectoralimpactvariesaccordingtothelevelofliberalisationachievedundertheCETA.Liberalisationappears togenerate itsgreatestgains for theservicessector, thoughgreaterdegreesof liberalisationcanresult inaworseoutcomeforsome industrialoragriculturalproductsasexpansion intheservicesstimulatesresourcestomoveoutofthesesectorsandintotheservicesoverthelongterm.ThisappearstobegenerallythecaseinbothCanadaandtheEU,thoughtherelativeimpactisgreaterintheformer.

Inagriculture,PAPsand fisheries,significantdegreesof liberalisationwould likelyhaveapronouncedimpactonanumberofsectorsinCanadaandtheEU.CanadawouldrealisesignificantgainsfromaCETAthatprovidednotableincreasesinaccessforitsexportsofbeefandpork.Theimpactonbothbeefandpork is likely tobe influencedby the rulesoforigin that theCETAadopts,withmore restrictive ruleslikelytolowerthepotentialgainsinCanadagiventheintegrationoftheindustrywiththeUnitedStates.TheEU isexpectedtobenegativelyimpactedunderaCETAthatprovidessubstantialimprovementsinmarketaccesstoCanadianproducers.Themagnitudeofthisimpactwouldbeexpectedtoincreasewithgreater levelsof liberalisation,with thepork industry inparticularstanding tobenegativelyaffected.Further, expansionof thebeef andpork industrieswould likely lead to greaterherd size inCanada,potentiallyleadingtoincreasedreleasedofmethaneasabyproduct,creatinganegativeenvironmentalimpact.

LimitedtomoderategainsareexpectedforCanadasfisheriessectorunderthefullremovaloftariffs,withthegreatestimpactlikelytooccurinexportsoffrozenfishandseafood.IntheEU,processorscouldpotentiallybenefit fromcheaper imports fromCanada,whileconsumerswouldstand tobenefit fromreduced costs. The EU would also likely benefit from liberalisation of investment in the sector,particularlyinregardstoloweringthedomesticownershiprequirementforthegrantingofcommercialfishing licenses.Theprimaryenvironmental risk is that theCETA could lead tooverfishing in certainpartsof theAtlanticand increased relianceonaquaculture. IncreasedCanadaEU collaboration couldprovidegreater impetusforthedevelopmentofmoresustainablefisherypractices,suchastheuseofseparate containment tanks in aquaculture,maintaining sustainableTotalAllowableCatch levels andsustainablefishingpractices.

EU dairy producers access to the Canadian market is significantly restricted by Canadas supplymanagementsystem.Ifthissystemweretobeeliminated,theEUwouldbeexpectedtoseesignificantincreasesinoutputandexports.Atthesametime,thiswouldinvariablyresultinanegativeoutcomeforCanadiandairyproducers, though itwould likelybenefit consumersby reducingprices.Nevertheless,


16

such an outcome appears unlikely, though gains to the EU could still be realised through improvedminimumaccessrequirementsand/orgreaterrecognitionofGIsforanumberofEUproducedcheeses.

TheEUcouldalsorealiseincreasedexportsofbeveragestoCanada,thoughtheoutcomeislargelynontariffrelatedandreliesontheAgreementsabilitytoresolvediscriminatorypracticesthatareallegedtotakeplaceinprovincialliquorcontrolboards.

Producersofprocessedagriculturalproducts(notincludingmeat,dairyorfish)inbothCanadaandtheEUcouldpotentiallyrealisegainsfromliberalisationundertheCETA.TheimpactonCanadaandtheEU,however,would be influenced by theAgreements rules of origin,with anAgreement that adoptedCanadian rulesoforiginpotentially increasing thegains forCanadaandprovidingpotential formorethirdcountries'productstobeprocessedandsenttotheEU. Bothsidescouldalsorealisegainsfromgreaterharmonisationinlabellingandpackagingrequirements.

It isnot expected that theCETAs economic impacton agriculture, PAPs and fisherieswill lead to apronounced social impact. Full removal of tariffs would result in the greatest social impact, bygeneratingthelargestnumberofjobs,butalsoleadingtothegreatestamountofdisplacementinthosesectorsexpectedtocontractundersuchadegreeofliberalisation.ThedairyindustryinCanadacouldbethemostnegatively impacted,withanumberofproducersbeingdisplaceddue to thedismantlingofsupplymanagement,whileremovaloftariffsintheEUwouldlikelyleadtodisplacementinitsporkandbeef industries.Nevertheless, it isdoubtfulthattheCETAwould leadtofullremovaloftariffs, limitingthe likelihood that workers within these industries will be negatively impacted as a result of theAgreement.

Withsignificantdegreesofliberalisation,itislikelythattheCETAwillhaveanenvironmentalimpactinthe agriculture and PAPs sector by increasing output. Greater demand for Canadian agriculturalproductswould requirean intensificationofagriculture tobeachievedby increasingchemical inputs,changing the distribution of crop production, and potentially encroaching onto marginal or otherproductive lands. These changeswould affect land usage and quality,water usage and quality, airpollution, biodiversity and waste creation. Under less ambitious liberation scenarios, the expectedoverallenvironmentalimpactfromCETAwouldbelimited.Moreover,ifexpectedincreasesincropslikewheatunder full liberalisationscenariosareproducedusingmoresustainablepractices,suchasnoorreduced till, thenegative environmental impact canbemitigatedbecauseof reduced emissions andchemical inputs. This trend towardsmore beneficial agricultural practices can potentially be furthersupported under CETA through CanadianEuropean cooperation and European preferences forsustainableproducts.

IndustrialproductsaregenerallynotsubjecttohightariffratesineitherCanadaortheEU,limitingtheimpactthattariffliberalisationislikelytohave.Thisisspecificallythecaseforminingandmanufacturedmetalproducts,oil,coalandforestbasedindustrieswhicharenotexpectedtobesignificantlyaffectedby trade liberalisation. Instead, investment liberalisation is likely to have a greater impact on theseproducts,thoughitisnotexpectedthattheCETAwillsignificantlyincreasethelevelofEUFDIintothesesectorswithinCanada.TheCETAcould leadtogreater investment inCanadasminingsectorwiththeremovalofownershiprestrictionsonuranium, in turnpotentially leading togreateroutputand tradewithinCanada.Theextensionofnational treatment toEU investorscould induce limited increases ininvestmentinCanadasminingofothermetalsandminerals,thoughitislikelythatpricewillcontinuetobethedrivingforcebehindsectoral investment.This issimilarlythecasefortheoilsector,where it isnotexpectedthattheCETAwillsignificantlyalterEUinvestmentorCanadianoutput.

TheCETAhasthepotentialtohaveapositiveimpactonCanadaandtheEUstransportationequipmentsector,withtheeliminationoftariffsexpectedtoleadtoincreasesinoutputandexportsoverthelong


17

term.Therulesoforiginonautomotiveproductsarean important issue,withstringentrules likelytosignificantlyrestricttheabilityofCanadianmanufacturerstocapitalisefrompreferentialtariffsunderaCETA.Additionally,differencesinemissionstandardsbetweenCanadaandtheEUcouldservetofurtherreduceestimatedgainsfortheCanadianautoindustry.Thisislargelydependent,however,onthelevelof market access granted to Canadian auto manufacturers under the CETA, with significantimprovements in market access likely to stimulate Canadian producers to make the necessaryinvestments in order to meet the stricter EU standards. The EU would similarly be expected toexperience gains, though thiswould be predominantly in the auto sector,with itsmanufacturers ofothertransportexpectedtoexperienceminordeclinesinoutputandexportsasaresultoftheCETA.

TheCETAwouldbeexpectedtohaveapositiveimpactonthetextilesindustriesofCanadaandtheEU.Canadawould likelyexperience increases inoutputandexports in its textilesandapparelsectoroverthe longtermwiththefullremovaloftariffs;althoughtherecouldbesomedeterioration inthetradebalancefortheseproducts.WithintheEU,theCETAislikelytopositivelyimpactoutput,exportsandthebalanceoftradefortextiles,clothingand leatherproducts.FurthergainsfortheEUwouldarise iftheCETA leads to the removalofbarriers to the freecirculationofgoods inCanadaaswellas improvedenforcementofIPR.TheimpactonCanadaandtheEUwilllikelybesignificantlyinfluencedbytherulesoforiginultimatelyadopted,withCanadabenefittingfromlessrestrictiverules.

The social impact is likely tobe limited.Quality anddecency ofwork couldbe somewhat improvedwhere theCETA includesachapteron tradeand labour thatprovides forbetter implementationandratificationoftheILOsCoreLabourStandardsandDecentWorkAgenda.Canada,specifically,couldseeitsstandardsandrightsimprovedwithrespecttocollectivebargainingandfreedomofassociationwithprovisionsthatrequireratificationofthe ILOsConvention98whichprovides legallybindingmeasuresonsuchrights.

With limitedexpected impactonproduction in themining,metalmanufacturing,oil,coaland forestbasedindustries,itisnotexpectedthattheCETAwillleadtoasignificantenvironmentalimpactinthesesectors.GHGemissionsfromtheautoindustrymayincrease,thoughimprovementsinenergyintensitycouldhelpoffsetthesegainsandmitigatethenegativeimpact.

TheservicessectorhasthepotentialtogeneratethegreatestgainsforbothCanadaandtheEU,thoughthisoutcomeisdependentonaCETAthatachievesasignificantamountofliberalisation.LiberalisationwouldlikelyprovidesignificantbenefitstomaritimetransportservicesinbothCanadaandtheEUandleadtopronouncedincreasesinoutputandtrade.IncreasedmerchandisetraderesultingfromtheCETAwill directly increase the demand for maritime transport services, increasing output and exports.ProvisionsintheCETAthatwouldenhancethepositivegainsincludeliberalisationoffeederservicesandrepositioninginCanadawhichwouldlowercosts,increasecompetitivenessandefficiencyandalsospurgreaterlevelsofFDIinCanadasmaritimetransportsector.

TheCETAhas thepotential to significantly impact theCanadian telecom sector,primarily through itsabilityto liberaliseCanadasforeignownershiprestrictions. IftheCETAresults intheremovaloftheserestrictions, it is likelythatthe impact inCanadawillbepronounced,withsizeable increases in inwardFDI, output and exports occurring over the longterm. Additional benefits would occur throughimprovedcompetitiveness in the industry,whichwould serve toenhance technologicalacquisitionofCanadian telecom companies and help to stimulate their expansion into foreignmarkets. Canadianconsumerswouldlikelybenefitsubstantiallyfromreducedprices,improvedserviceandwiderselection.EU telecom companies would also benefit by increased access to the Canadian market, spurringincreased investmentthroughestablishmentandacquisitions.Whilesuchanoutcomemaynot impactoutputandcrossbordertradewithintheEU,itwouldbenefitEUexportsviamode3.Additionalbenefits


18

couldbeachievedbytheCETAsgrantingofnondiscriminatoryaccessto infrastructureandnetworks,thoughthisislikelytohavelessofanimpactthantheremovalofownershiprestrictions.

TheCETAisunlikelytohaveapronouncedimpactonoutput,trade(asitpertainstocrossbordertradeandsalesthroughforeignaffiliates)andinvestmentinthefinancialservicessectorofeitherCanadaortheEU.TheCETAis,however,expectedtohaveapositiveimpactontheotherbusinessservicessectorswithinbothCanadaandtheEU,withgreatergains likelytoaccrueunderanAgreementthatprovideshigherdegreesofliberalisation.However,giventheabsenceofrestrictionsformostsubsectorswithinthebusiness services sector, theoverall impact from theCETAmaybe limited, and instead serve tomaketheexistinglevelofliberalisationlegallybinding.Nevertheless,liberalisationcouldyieldbenefitsincertainsubsectorswherespecificbarriersarepresent,whileimprovementsinthetemporarymovementoflabourcouldservetobenefittradeandinvestmentacrosstheentiresector.Liberalisationofbothattheborder andbehindtheborder restrictionson temporarymovementofprofessionalswould likelyserve to increase the level of crossborder trade aswell as the investment and trade occurring viaforeignaffiliates,providinggreaterbenefits.Inordertorealisethegreatestgainsitwillbeimportantforthe CETA to foster mutual recognition agreements allowing professionals to have theirqualifications/certificatesrecognisedinbothCanadaandtheEU.

Thesocialimpactisexpectedtobepositive,withtheCETAexpectedtoleadtothecreationofservicesjobsinbothCanadaandtheEU.Theenvironmentalimpactisalsoexpectedtobelimitedandcouldbebeneficial if expansion redirects resources away from more environmentally harmful sectors (e.g.extractiveindustries)andtowardsservices.Increasedmerchandisetradewouldbeexpectedtoleadtogreater GHG emissions from the transport services sector. At the same, the vast majority of thisincreased trade would be expected to occur through maritime transport, which has a lowerenvironmental impactthan landorair transport.Tothedegree thattrade inCanada isdivertedawayfrom the U.S. and toward the EU, the environmental impact could be positive by replacing landtransportwithmaritimetransport.Further, liberalisingfeederserviceswithinCanadacouldcontributetothedevelopmentofCanadasshortseashipping industry,whichcouldhelp improveenvironmentalperformanceofthetransportsectorbyredirectinglandshipmentstoseashipments.

Crosscuttingissuesassessments:

Government procurement (GP): A government procurement chapter in CETAwill have a variety ofimpactsthatarepositiveforsomeandnegativeforothers.Themaineffectofthechapterwouldbetoencouragecompetiveness in thebiddingprocess. Itwillclearlyreduceregulatory flexibility inCanada,someofwhichwillalso constitute reductions ineconomicand social,andpotentiallyenvironmental,policyspaceofthetyperelevanttothisSIA.Still,theoveralllossinpolicylosswouldbemitigatedtoacertaindegreebyanumberoflegalitieslikelyinCETA,includingthattheagreementwouldonlydirectlyapplytocontractsabovecertainthresholds.

Specifically, these impactswouldbe felt in termsofgovernment savings,market share,employment,andqualityanddecencyofwork.The increasedGPcompetitionCETAwould likelycreatemay inturnresultinsavingsbytheCanadiangovernmentandlowercostgoodsandservices,whileanysimilareffectwouldbemuchlesspronouncedintheEUgivenitsalreadyhighlyliberalisedGPmarket.CETAwilllikelyallowEU firms togainsomeGPmarketsharewhere theycouldnotbefore,e.g. insomeutilities,andmayallowCanadianfirmstomakecomparativelyminorgainsintheEUGPmarket.TheextentofthesegainsdependsonanumberoffactorsofcompetitivenessandnotjustmarketaccessaffordedinCETA,asawiderangeofforeignsubsidiariesarealreadycompetitiveintheCanadianGPmarket.Anincreasein indirect crossborder competition, i.e. from foreign subsidiaries,may lead to shifts in jobs among


19

firms operating in Canada. The full effect on employment within jurisdictions/regions in Canada isunclear, althoughprohibitionofoffsetsmayhavenegative impacts, andAboriginal suppliersmaybesomewhatnegativelyimpacted,atleastintheshortterm,byprohibitionofsetasides.CETAseffectonfairwageandothersocialconsiderationGPpoliciesintheEUandCanadaisunclearwithoutfurtherdetailsoftheAgreement,althoughifrestrictedwouldclearlyhavenegativeimpacts.

Neutral impacts are expectedon thequalityof governmentprocured goods and services.CETAmaycreate some positive impacts in terms of wider choice of GP service providers, although availableevidencedoesnotclearlyindicatethataGPchapterinCETAwouldsignificantlyaffectqualityofpublicgoods and services, includingwater delivery andmanagement, and health and education. In part, anumberoflegalitieslikelyincludedinCETAsGPChapterwouldensurequalityofgoodsandservices.

A GP Chapter in CETAwould likely havemixed environmental impacts, although depending on thewordingcouldhavenotablenetnegativeimpacts.CETAsprohibitiononoffsetscouldhavesomemixedenvironmentalimpacts,particularlyinCanadawhohasmaintainedmanyoffsetsundertheGPA.IfCETArestrictsinitiativesongreenprocurementitwouldhaveasignificantnegativeimpactinCanadaandtheEUaccordingtoanumberofenvironmentalindicators.

IntellectualPropertyRights:CanadaoffersastandardlevelofIPprotectionbutonelowerthanthatoftheEU,and it is thusassumed thatCETAwill lead toanupwardharmonisationandcallprimarily forchange in Canadian IPR laws. IPRrelated provisions of CETA could have aminor positive impact onCanadianGDPgrowth,andmayhaveaminorpositiveimpactonEuropeanGDP.Specifically,aCETAIPRchapter will likely have a slight positive effect on specific industries in the EU, such as agrifoodcompaniesusinggeographicalindications.ItwouldalsobenefittheCanadianpublishingindustryandtheinnovativepharmaceutical industry. It could alsobenefit certain television, film and sound recordingindustriesviareducingpiracyandincreasingrevenues.Atthesametime,anIPRchapterinCETAcouldlead to notable negative effects on certain consumers in Canada, for example via higher prices oneducationalandpharmaceuticalproducts.ImprovingIPRenforcementasaresultofCETAcouldleadtoincreased FDI flows and technology transfer, resulting inpositive spillovereffectsonproduction andpotentiallyonemployment.Overall,however, stronger IPRprotectionwouldhavemixed impactsonCanadianemployment.ItwouldhaveapositivebutminorimpactontheemploymentrateintheEU.Intermsofpolicy space,asanet importerof IPRrelatedassets,Canadahasan interest inmaintainingsomeIPRexceptionsandlimitations.

Investment:TheimpactofCETAasawholeoninvestmentinCanadawilllikelybepositive,butofminortonotablemagnitude.The InvestmentChapter inCETA couldencourageeconomicbenefits includinginvestmentrelatedeffectsaswellas tradestimulatingeffects inCanada,although the significanceofthesewill likelybeminortonotableatmost.Theroleof investorstatedisputesettlement (ISDS)asacontributortotheaforementionedeconomicbenefitsisunclear,astheredoesnotappeartobereadilyavailableempiricalevidenceonthematter.

Theeconomic impactofCETAasawhole,an InvestmentChapterspecifically,and ISDSspecificallyoninvestmentintheEUwillfollowthetrendsmentionedforCanadabutonasmallerlevelofsignificancegiventherelativelylargersizeoftheEUeconomyaswellastheEUsrelativelyhigherlevelofinvestmentliberalisation.

TheremaybesomepositivesocialandenvironmentalimpactsfrominvestmentencouragedunderCETAasawhole;however,thepolicyspacereductionscausedbyISDSallowancesinCETAinparticular,whilelikelylesssignificantthanforeseenbysomeparties,wouldbeenoughtocastdoubtonitscontributionto net sustainability benefits. Regarding social issues, increased investment under CETA might bechannelled intocreating jobs inCanadaand theEU thatscorehigheronqualityanddecencyofwork


20

indicators,althoughitmayalsocreatesomedegreeofworkerdisplacementandwageinequality.Eitherway,these impactswould likelyberelatively limited.Regardingenvironmental issues, ifCETAweretoincreaseFDI intheoilsandsandminingsectors inCanada,thiscould leadto increasedenvironmentalimpacts since these sectorsareenvironmentally intensive.At the same time, some investmentmightgravitatetowardsgreentechnology,producingpositiveimpactsinCanadaandtheEU.RegardingISDSinCETA,theconflictingcostsandbenefitsofsuchamechanismmake itquestionablethat its inclusion inCETAwouldcreateanet/overallsustainabilitybenefitfortheEUand/orCanada.

Trade facilitation:Given the relatively sophisticated stateofexisting customs andborder regimes inCanadaandtheEUoverall,butwithexceptions forcertain individualEUMemberStates, it isunlikelythat therewillbesignificanteconomic,socialorenvironmental impacts from trade facilitationreformunderCETA.However, incorporatingprovisionsunderCETA to reform and improve trade facilitationwould be particularly useful in limiting costs of compliance that will inevitably increase with theintroductionofnewrulesoforiginunderCETA.

Labour mobility: Labour mobility provisions in CETA focused on workers in professional businessservicescouldresultinamoreefficientallocationofskillsandincreasedproductivityinCanadaandtheEU,aswellasincreaseinnovationthatcouldleadtosocialandenvironmentalbenefits.

Free circulation of goods: The CETA provides an opportunity to bring the federal and provincialgovernments together to enactmajor reform in terms of allowing freecirculation of goods withinCanada.Provisionsallowingfreercirculationofgoods,whichwilllikelyfocusontheagricultureandagrifoods sector given thebarriers in that sector, could improveCanadasproductivityperformance andallowbenefitstoEUexporters.

Competitionpolicy:IfCETAremovesdiscriminatorypracticesoftheCanadianliquorcontrolboardsthiswouldencouragecompetition.Whilereducingregulatory flexibility,evidencesuggests that thiswouldnotnecessarilyunderminepublichealthandsafetyobjectivesastheCanadiangovernmentwouldretainthemost importantpolicy tools for reducingoverconsumptionofalcohol, i.e.beingable tosetpricefloorsandimposetaxesonbeer,wineandspirits.

RemovalofdiscriminatorypracticesbytheCanadianWheatBoardcouldimprovewagesofcompetitivewheatfarmers.Andthereisevidencetolimitconcernsaboutthenegativeeconomicandsocialimpactsofremovingsuchpractices.

Nosignificantnegative impactsorunclear impactsarepredicted forthe twoothercompetitionpolicyissues.Ifbeingnegotiated,CETAwouldlegallybindCanadasrecentliberalisationininternationalletterdeliveryviaBillC9totheEU,butwouldnotbeexpectedtohavenegativeeffectsonqualityofpostalservices.TheimpactsofrevisingstateaidpoliciesunderCETAareunclearwithoutfurtherdetailsoftheAgreement.

POLICYRECOMMENDATIONS:

Given theprovisionalnatureof thepolicy recommendations and the importanceof the consultationperiodandfeedbackfromtheSteeringCommitteeandstakeholdersontheproposals,theproposalsarenotpresentedinsummaryformintheExecutiveSummary.Instead,thereaderisinvitedtoreadsection8 in itsentirety.Thefinalrecommendationswillbesummarised intheExecutiveSummary intheFinalReport.

MOVINGFORWARD:


21

The final step to completing the SIA will be to incorporate the ongoing feedback received fromstakeholdersandtheSteeringCommitteeonthedraftFinalReport.ItisenvisagedtheFinalReportwillbeavailablearoundthesecondtolastweekinApril2011.


22

1.INTRODUCTION

1.1 EUCanada Comprehensive Economic andTradeAgreementOverviewofnegotiations

WiththenegotiationsonaComprehensiveEconomicandTradeAgreement(CETA),theEUCanadatradeandeconomicrelationshiphasnowmovedbeyondtheTradeandInvestmentEnhancementAgreement(TIEA) toward an agreementwith amuch broader andmore ambitious scope. The TIEA, onwhichnegotiationsbegan in2004butwere suspended in2006, followed severalotherpreviousEUCanadaeconomiccooperationframeworks,forexamplethe1998EUCanadaTradeInitiative.

NegotiationsonaCETAare takingplaceonanumberofareas including trade ingoodsand services,investment, government procurement, competition policy, intellectual property and trade andsustainabledevelopment.Negotiationson tradeofgoodsareexpected to include trade in industrial,agricultural and fishery products while also including tariff and nontariffmeasures, trade defenceinstruments,technicalbarrierstotrade(TBT),sanitaryandphytosanitary(SPS)measures,customs/tradefacilitationandrulesoforigin.Within trade inservices,negotiationswill includecrossborderdelivery(modes 1 and 2), the temporary presence of natural persons for business purposes (mode 4), andregulatoryprinciples. Investment issuesareexpected toaddressestablishment (mode3) for servicesandnonservicessectors,capitalmovementsandpayments.

The launchofCETAnegotiationswasofficiallyannouncedon6May2009attheCanadaEUSummit inPrague. The first full round of negotiationswas held inOttawa inOctober 2009withmany of theCanadianprovincesinattendance.Asofpublicationofthisreport,sixroundsofnegotiationshadtakenplace,withthesixthroundinJanuary2011.

1.2EUCanadaSustainabilityImpactAssessmentEuropean Commission Trade Sustainability Impact Assessments (hereafter also referred tointerchangeably as Trade SIAs, TSIAs,or simply SIAs) assess thepotential impactsofproposed tradeliberalisationagreementsonallpillarsofsustainabledevelopmentinordertooptimisepolicydecisionmaking/tradenegotiations.TheEUCanadaSIAisconductedbyDEVELOPMENTSolutionsEuropeLtd.(DS)incooperationwithkeyexperts.

TheSIAisdividedinto3phases:

Phase1(endofJulybeginningofSeptember2010)

Phase1wasdesigned toensure the reviewof relevant information sources, flaggingof sustainabilityissues,firststagesofdatapreparation,preparationofanalyticaltoolsandtopresenthowtheworkfortheEUCanadaSIAwillbecarriedout.ThephaseculminatedwiththeFinalInceptionReport.


23

InceptionReport:followingsubmissionofthedraftInceptionReportattheendofAugust2010,thefirstSteeringCommitteeMeetingandCivilSocietyMeetingwasheld inBrusselson7September2010 toformally discuss the contents of the report and provide any necessary feedback for revisions. TheminutesofthisCivilSocietymeetingcanbefoundontheSIAwebsiteathttp://www.eucanadasia.org/.FeedbackfromthesteeringcommitteemeetingandcivilsocietymeetingweredirectlyincorporatedintotheInceptionReport inordertocreatetheFinal InceptionReport.ThereportwasmadepublicontheSIAwebsiteafterapprovalinAugust2010.

Phase2(September2010December2010/January2011)

Phase2wasdesigned to incorporatedevelopments fromPhase1anddeliver theTradeSIAs interimquantitativeandqualitativeimpactassessment,whichwaspresentedintheInterimReport.TheInterimReportonlyincludespreliminaryconsiderationsfromtheeconomicmodelling,andnotthefullresultsofthesemodels.

Consultationwithcivilsocietywasanimportanttoolfordevelopmentoftheimpactassessmentinthisreport.During thisphase the teamprepared foranddelivered the LocalWorkshop inOttawaon26November 2010.A Preliminary Findings document, a summary of the results from the draft InterimReport,was provided to stakeholders registered to attend thatmeeting. Theminutes of the LocalWorkshopcanbefoundontheSIAwebsite.

InterimTechnicalReport:

ThedraftInterimTechnicalReportwassubmittedtotheSteeringCommitteeinlateOctober2010anditscontentswereinitiallydiscussedatthesecondSteeringCommitteemeetingon10November2010.Arevisedversionof the reportwassubmitted to theContractingAuthority inmidDecember2010.ThereportwasmadepublicontheSIAwebsiteafterapprovalinJanuary2011.

Phase3(JanuaryApril2011)

Phase3buildsontheInterimTechnicalReportandultimatelyculminatesintheFinalReport.Thisphaseinvolves further incorporation of stakeholder feedback into the impact analysis, revised economicmodelling,revisedimpactassessment,andpolicyrecommendations.

ThedraftFinalReportwassubmittedtotheContractingAuthorityinearlyMarch2011andmadepublicontheSIAwebsite in lateMarch2011.AsecondCivilSocietyMeetingandthethirdandfinalsteeringcommitteemeetingwillbeheld inBrusselson302011MarchtoreviewandprovidefeedbackonthedraftFinalReport.TheminutesofthismeetingwillbeavailableontheSIAwebsite.

FinalReport:Contents: The Final Reportwill include all findings from the study. The Final Report,whichwill beavailableontheSIAwebsiteafterapproval,willincludethefollowingelements:

ExecutiveSummary IntroductionandprogressoftheSIAsimplementation Summaryofmethodology Baselineconditionsoverview(tradeandeconomic,socialandenvironmentalspheres) Finalsustainabilityimpactassessment(includingmodellingresultsandexpertanalysis)

o Macrolevel(tradeandeconomic,socialandenvironmentalspheres)o Sectorallevel(tradeandeconomic,socialandenvironmentalspheres)o Crosscuttinglevel(tradeandeconomic,socialandenvironmentalspheres)


24

Proposalsforflankingmeasures/policyrecommendations;Conclusions Informationonconsultationactivitiesundertaken References Annexes (modelling tables; minutes of local workshop, workshop program and list of

participants,etc.)

Additionally, theFinalReportwillbeaccompaniedbyaBriefingDocumentwhichwillnotexceed twopages.

Stateofplay

TheEUCanadaSIAdraftFinalReportprovidesacomprehensivesustainabilityassessmentonpotentialimpactsoftradeliberalisationunderCETA.Theassessmentisundertakenatthreelevels:

Macroeconomicassessment

Sectoralassessment

Crosscuttingissuesassessment

ThemacroeconomicsectiondiscussesmacroeconomiceffectsforecastedforCanadaandtheEUasawhole,andincludesabriefdiscussionofthemacroeconomiceffectsoncertainthirdcountries.

Thesectoralassessment looks indetailatthesocial,economicandenvironmental impacts in3sectorsand 16 subsectors. The sectors and subsectors selected for analysis in this report are those thatcontainthehighestfrequencyandmagnitudeofpotential impactsandsensitivitiesas identified intheInceptionReportandasconfirmedand/oraddedbyadditionalresearch(includingconsultations)fortheInterimReport.The3sectorsand16subsectors:are theagriculture,processedagriculturalproducts(PAPs),andfisheriessector,andthesubsectorsofgrainsandoilseeds,beefandpork,dairy,otherPAPS,beverages, and fisheries; the industrial products sector, and the subsectors of mining andmanufacturedmetalproducts(ferrous,nonferrousandfabricatedmetals),oilandpetroleumproducts,coal,forestbased industries(wood,paperandforestry),automotiveandtransportequipment,textiles(textilesclothing,leatherandfootwear);andtheservicessector,andthesubsectorsoftransportation,telecommunications,financial,andotherbusinessservices.

Thecrosscuttingassessmentanalyses7key issues.These crosscutting issuesaredefined inpartbythe studys Terms of Reference. The crosscutting issues considered in the report are: governmentprocurement,intellectualpropertyrights,investment,tradefacilitation,labourmobility,freecirculationofgoods,andcompetitionpolicy.

Whilethefocusoftheassessmentisontheeconomic,socialandenvironmentaleffectsontheEUandCanada,italsoassessesthepotentialimpactsontheUS,Mexicoandagroupofothercountries/regionsincluding,amongothers,avarietyofdevelopingcountries.

ThedraftFinalReportalsoincludesasectiononpolicyrecommendations,alsocalledflankingmeasures,whicharebasedontheresultsofthesustainabilityanalyses.Thesemeasurescoverbothenhancementand preventative/mitigationmeasures, i.e.measures needed to reinforce key positive sustainabilityimpactsandtopreventoratleastmitigatemajornegativesustainabilityimpacts.Recommendationsarepresentedintwomaincategories:

MeasuresrelatedtoprovisionsthatwilllikelybeincludedinCETA(trademeasures)


25

Measures,notdirectlyrelatedtoprovisions inCETA,forcooperationthatmayaccompanytheagreement(cooperationmeasures)

NextstepsTheFinalReport,expectedinApril2011,willfurtherbuildonthedraftFinalReportbyconsideringanyadditionalfeedbackreceivedfromstakeholdersandtheSteeringCommittee.Allstakeholderfeedbackreceivedupuntilthenextcutoffdeadlineof11April2011willbecompiledandconsideredforinclusionintheimpactassessmentfortheFinalReport.


26

2.METHODOLOGY

2.1Introduction:EvidencebasedApproachTheEUCanadaSIAadoptsthebasicmethodologicalframeworkforTradeSIAsasdescribed intheECsHandbook forTradeSustainability ImpactAssessment (EC,2006).TheSIAmethodology isdesigned toprovide trade negotiators and policymakers with an evidencebased assessment of the potentialeconomic,socialandenvironmentalimpactsofalternativetradeliberalisationscenarios.

This sectiondescribes themain componentsand toolsof theSIAmethodologyasapplied in theEUCanada SIA. The study team has used a variety of evidence sources to inform the qualitative andquantitativesustainabilityimpactanalysesforspecificindicators.Thesourcesofevidenceincludeformalmodelling (CGE, E3MG and investment gravity modelling) results, and quantitative and qualitativeevidence collected from desk research and consultations. Causal chain analysis is applied to theevidencebasetoestimatesofimpactonkeyeconomic,socialandenvironmentalindicators.

2.2.IndicatorsTable 1 lists themain TSIA sustainability indicators that are applied in this Final Report.1The coreeconomic,socialandenvironmentalindicatorslistedinboldaretakendirectlyfromtheoriginal1999SIAmethodologyandmentionedintheHandbookforTradeSustainabilityImpactAssessment(EC,2006).2Inaddition,otherfrequentlyusedindicatorsarelisted(notinbold)inthetable.

Table1:SustainabilityimpactassessmentindicatorsSustainabilitypillar Theme Indicator

Peoples ability tosupport themselvesandtheirfamilies

Employment/unemploymentrate

Competitiveness and marketshare

1Beforeselectingtheindicatorsproposedherein,keysustainabilitythemesandrelatedsubthemeswereidentified.Theindicatorsarespecificandmeasurable,illustratetrendsovertime,arereliableandcredible,coherent,andcomprehensive;theyarealsorelevanttopolicymaking(intermsofrelevancetosustainable/unsustainabledevelopment,domesticpolicytargets/internationalagreements,etc.).2Theseindicatorsareusedconsistently,asenvisagedbytheSIAhandbook;howeverthisSIAmakeschangestotheusageofothercoreindicatorsasenvisagedinthehandbook.AlthoughacoreindicatorforpreviousSIAs,thepovertyindicatorwasnotappliedindepthinallanalyseswithinthisreport.Forcontext,theSIAmethodologywasemployedinthepastontradeagreementstheEUwasnegotiatingwithdevelopingcountries.PovertyissuesinthecontextoftheEUCanadaCETAarenotofthesamemagnitudeasinanagreementbetweentheEUanddevelopingcountries,andassuchthepovertyindicatorisgivendifferentweightinthisparticularSIAandonlymentionedwhenrelevant.IndicatorsforhealthandeducationwereusedonlywererelevantthroughouttheSIA.FDIwasusedasaproxyforthefixedcapitalformationindicatorproposedinthe1999methodology.


27

ECONOMIC economic

performance

exports

output

imports

FDIflows

GDPgrowthrate

overalltradebalance

bilateraltradebalancebetweenEUandCanada

Other strengthofinstitutionalandregulatoryenvironmentspolicyspace*

SOCIAL

Quality and decency

ofwork

Wages/income

Equityinwages

workerdisplacementlevelsandabilitytoshiftamongoccupations

strengthofcollectivebargaining

qualityofworkenvironmentintermsofhealthandsafety

Other strengthofinstitutionalandregulatoryenvironments

policyspace*

povertylevels

publicsafety

accesstoand/orqualityofhealthcare

accesstoand/orqualityofeducation

rateoftechnologicaladvancement/innovation

ENVIRONMENTAL

Environmental

quality

Wastefromoutput(includinghazardousandtoxicwaste,aswellasother

typesofwastes)

rateofGHGemissions

Natural resource

stocks

rateofreductioninbiodiversity

fishstocks

forestusage

mineralusage

fossilfuelusage

Other strengthofinstitutionalandregulatoryenvironment

policyspace*

*UsageoftheconceptofpolicyspaceinthisSIA:Someusethetermpolicyspacetomeanallregulatoryflexibilityintermsofthebreadththatgovernmentisaffordedinmakingpolicies.However,policyspaceasusedasanSIAindicatorexclusivelyreferstoregulatoryflexibilitythatifreduceddirectlyresultsintheinabilityofgovernmentstomakepoliciesthathavecleareconomic,socialorenvironmentalbenefits.Inotherwords,reductionsinpolicyspaceasdefinedhereinshouldleadtonegativeexternalities(forexample,hurtinghumanand/orenvironmentalhealth,increasingthecostofgoodsandservices,reducingqualityofgoodsandservices,hurtingwagesandemployment,amongothernegativeeffects).Itdoesnotrefertothewiderconceptofreductionsinregulatoryflexibilitythatcancreatepositiveimpacts(forexample,improvingtheefficiencywithwhichbusinessesoperateandcreatingpositivespillovereffectsonemploymentandincome,amongothereffects).Asanote,the


28

costsandbenefitsfromreductionsinpolicyspacearetypicallydifficulttocalculateandvaryamongcircumstances.

2.3Evidence

2.3.1.ModellingApproachModelling using a CGEmodel, E3MGmodel and gravitymodels provided a fundamental source ofevidence for the quantitative analysis performed in this Final Report. These results were theninterpretedand incorporated intothemoredetailedassessmentofspecific indicators,asdescribed inSection2.4below.

CGEModelDuetotheinterlinkagesbetweenvarioussectorswithinCanadaandtheEUaswellastherelationshipthese sectors have with the rest of the world, the assessment of the liberalisation of trade andinvestment in theEUCanadaCETA requiresananalytical framework thatallows foraholisticviewofworld economies. This has been accomplished through application of a multiregion ComputableGeneralEquilibrium(CGE)modelbasedontheframeworkoftheGlobalTradeAnalysisProject(GTAP).

Basicmodelstructure

Themodelemployedisacomparativestaticmodelgroundedinneoclassicaltheories.3Inparticular,CGEmodels build upon general equilibrium theory that combines behaviour assumptions of rationaleconomicagentswith theanalysisofequilibriumconditions.Themodelassumesperfectcompetitionandthusconstantreturnstoscaleinsomesectorsandmonopolisticcompetitioninanumberofsectors(dependingonpriorassessmentofthesectors),andprofitandutilitymaximisingbehaviouroffirmsandhouseholds, respectively. The model uses version 7 of the GTAP database and is executed withGEMPACKsoftware.

Themain virtue of the CGE approach is its comprehensivemicroconsistent representation of pricedependentmarket interactions. The simultaneous explanation of the origin and spending of agentsincomemakes itpossibletoaddressbotheconomywideefficiencyaswellasdistributional impactsofpolicyintervention/interference.

Baseline,liberalisationscenarios,countriesandtimeframe

ScenariospreparedwithinaCGEmodel represent what iforcounterfactualexamples thatestimatewhat is likelytohappenundertheassumptionsmade inthemodel,thedataestimates,andthepolicyand other changes specified. These scenarios employ a baseline scenario that outlines the likelyeconomic,socialandenvironmentaleffectsintheabsenceofabilateraltradeagreementbetweentheEUandCanada,4aswellasliberalisationscenariosasrequestedintheTermsofReference.

3FulldocumentationoftheGTAPmodelandthedatabasecanbefoundinHertel(1997)andDimarananandMcDougall(2002)4TermsofReference,pg11.


29

Baseline scenario:Abaseline scenario isutilised toquantify theeconomic, socialandenvironmentaleffects in theabsenceofabilateral tradeagreementbetween theEUandCanada. Inorder toobtainseparate price and quantity observations, the common convenient procedure is to choose units forgoods and factors so that they have a price of unity in the benchmark equilibrium. This scenarioencompassesasuccessfulcompletionoftheDohaRound.

Liberalisationscenarios:

TheFinalReportemploystwoliberalisationscenarios5:

ScenarioA.100% liberalisationofgoodsand lessambitious liberalisationofservices,usingtheservicestradecostcutsemployedinthe2008JointStudymultipliedbyafactorof0.6(Table2).

Scenario B. 100% liberalisation of goods and ambitious liberalisation of services, using theservicestradecostcutsemployedinthe2008JointStudy(Table2).

Table2:CutinservicetradecostsbysectorandscenarioSectors ScenarioA ScenarioB

Electricity 3.49 5.82

Gasmanufacture,distribution 3.49 5.82

Water 3.49 5.82

Construction 6.13 10.21

Trade 3.76 6.27

Othertransport 5.45 9.09

Maritimetransport 5.45 9.09

Airtransport 5.45 9.09

Communication 2.53 4.21

Financialservices 3.76 6.27

Insurance 3.76 6.27

Otherbusinessservices 5.45 9.09

Recreationandotherservices 3.76 6.27

PubAdmin/Defence/Health/Educat 2.29 3.81

Dwellings 3.76 6.27

Noteof scenariosused:While four scenarioswereoriginally employed in the InterimReport, itwasfound that scenariosmodelling slight variation in the assumed level of tariff liberalisationwere notproducingnotable changes to the results.As such, itwasagreedwith theContractingAuthority thatonlytwoscenarioswouldbeused inrevisedscenariosfortheFinalReport,withbothfocusingontheassumedservicesliberalisation.Forinformationonthefourscenariosused intheFinalInterimReport,refertothatreport.

5Given the importance of investment in EUCanada bilateral relations, a third CGE scenario was originally intended thatmodelled the effects of investment liberalisationwithin the CGEmodel.However, given data limitations itwas ultimatelydecided thatsuchanexercisewouldnotbeable toaccurately reflect theoutcomeof theCETAandwould thusnotproviderealistic,policybasedoutcomes.


30

Geographical aggregation: The liberalisation scenarios have been applied across a select group ofcountries: the EU; Canada; US; Mexico; Least Developed Countries (LDCs) for which GTAP data isavailable;European/MediterraneancountrieswithpreferentialagreementswiththeEUforwhichGTAPdataisavailableandRussia;Africa,CaribbeanandPacificCountriesexcludingLDCsforwhichGTAPdataisavailable;andChina.

Timeframe: The results of the CGE model reflect longterm outcomes where resources have hadsufficienttimetoreallocatecapitalinresponsetotheCETA.Herein,allresultsshouldbeunderstoodasrepresentingtheoutcomeoftheCETAbyapproximately2020.

ThemainresultsgeneratedbytheCGEmodellingare:

Impactsonoutput,tradevolumesandtradeprices,byproductgroup Macroeconomicimpacts:Welfare,GDPandaggregateexports Labourmarketimpacts:Employmentandwagerates

ForfurtherinformationontheCGEmodelemployedintheSIA,andthemodellingresultsseeAnnex1.

E3MGModelThemodelling approach further employs amultiregion framework of global trade and energy use.Combustionof fossil fuels isadriving forceofglobalwarming through the releaseofCO2andcausesseriousregionaland transboundarypollution throughemissionsofSOxandNOx.Anadditionalmodel,theE3MGmodel,hasbeenusedalongwiththeCGEmodeltobetterdetailthefullscaleofrelevantCO2emissions.

The E3MG model is an econometric model for the world capable of addressing issues that linkdevelopments andpolicies in the areasof energy, the environment and the economy. The essentialpurposeofthemodelistoprovideaframeworkforevaluatingdifferentpoliciesinthelongterm,whilealsogivinganindicationofshorttermtransitioneffects.

E3MG is a detailedmodel of over 40 sectors, compatible with ESA95 (Eurostat, 1995) accountingclassifications,andwiththedisaggregationofenergyandenvironmentindustries,inwhichtheenergyenvironmenteconomy interactionsarecentral; thisgivesastrongdegreeofconsistencybetween theeconomyandenvironmentresults.Themodelisdesignedtobeestimatedandsolvedfor20regionsoftheworld,althoughsingleregionsolutionsarepossible.

TheE3MGmodelprovidesanotableamountofdetail in itsmodellingofGHGemissions.Themodeldecomposes greenhouse gas (GHG) effects into scale effects (as a result of increased output),compositioneffects(asaresultofshiftsintherelativeweightofsectors)andpossibletechniqueeffects(as a resultofproductivity increases that canbe attributed to theCETA).As such, theGHG analysisthroughoutthisreportcoversemissionsacrossarangeofsectors.

Bycombining theworkingsof theCGEmodeland theE3MGmodel,estimatedenvironmentaleffectshavebeendirectly linkedwith changes inproduction andwill account forpollutions costs.ResultingimpactsareexpressedinunitsofwelfareintermsofmilliontonsofCO2emissions.

ThemainresultsfromtheE3MGmodelare:

Energyconsumption,byusergroupandbyfuel


31

CO2emissionsbysector,otheratmosphericemissions Macroeconomicandlabourmarketimpacts

Forfurther informationontheCGEmodeltobeemployed intheSIA,andtheresultsofthemodelforthisdraftInterimReport,seeAnnex2.

InvestmentModellingGravitymodelling isusedtoestimatetheresponsivenessofsectoral levelFDIflowsto liberalisationofinvestment flowsbetweenCanadaand theEU.Thekeyexplanatoryvariableemployed is investmentrestrictivenessasmeasuredbytheOECD.ThemodelshowshowinvestmentflowsintocertainsectorsinCanada and the EU changewith a reduction in restrictiveness. The applicability of themodelling isrestrictedgiventhelimitedavailabilityofdataonwhichitwasbased,althoughtheresultsaregenerallyreferencedasrelevant throughout theeconomicanalyses in the individual impactassessmentsof theSIA.

2.3.2DeskresearchDeskresearchwascriticaltotheresearchphaseofthisreport.Sourcesusedincludecredibleliterature,statistics,andcasestudies.Also,policystatements,laws,regulationsandinternationalagreementswerereviewed.

2.3.3StakeholderconsultationsAkeypartoftheSIA isconsultationswithstakeholders.Thestudywebsite,emailandphoneupdates,andthearrangingofcivilsocietymeetingsinBrusselsandalocalworkshopinCanadaareusedtocreateawarenessoftheSIAandelicitfeedbackfromstakeholders. Indepthconsultationsareundertakenviainterviews,solicitingwrittencommentsondraftsofstudyreports,questionnaires,monitoringthestudywebsiteswebform,andtheimplementationofsteeringcommitteemeetingsandcivilsocietymeetingsinBrusselsandalocalworkshopinOttawa.Detailedandthoroughstakeholderconsultationisvitaltoasuccessfulimpactassessment,andhasproventobeanintegralpartofthedatacollectingforthisreportaswellasprovidedinformationandfeedbackonthelikelyimpactsandscenariosstudied.Feedbackthatwaspresentedtothestudyteamwascloselyevaluatedandasrelevant,includeddirectlyinto the SIA report. For example, relevant factual information was directly included as part of thebaselineoranalysis.Alternative feedbackwas closely consideredasa stakeholder concern,and thelength and breadth of the analysis devoted tomentioning these concernswas determined by theirappropriateness/relevance and frequency of beingmentioned by stakeholders. See Annex 5 for anoverviewofthestakeholdernetwork forthestudy;aswellassummarised feedback fromcivilsocietyandbusinessgroupsinparticular(mostrelevantcommentsfromacademicconsultationsreferencedassuchwithin thebodyof the report),and civil society/workshopmeetingminutes,anda summaryofwheresuchinformationwasincorporatedintothereport.

Moredetailsoftheconsultationprocess:


32

AllSIAprojectdocuments, includingdraft reportsand theminutesofpublicmeetings,arepublishedonline(seewww.eucanadasia.org).Stakeholdershavealsobeen invitedtoprovidetheircomments inan online discussion forum. All stakeholder feedback received up until the next (and final) cutoffdeadlineof11AprilwillbeconsideredforinclusionintheFinalReport.

SteeringCommitteemeetingsBrussels

SteeringcommitteemeetingsareheldwithmembersoftheEuropeanCommissionateachphaseofthestudy.The comments from thesemeetingshavebeen considered in revising study reports.Thenextsteeringcommitteemeetingwillbeon30March2011todiscussthedraftFinalReport.

CivilSocietyMeetingsBrussels

Publicmeetingsareheldthroughoutthestudy.ThefirstcivilsocietymeetingwasheldinBrusselson7September2010wherethecontentsofthedraftInceptionReportwerepresentedincludingitsprocess,purpose,methodology,timingandconsultationactivities.Andanupdateonnegotiationswasprovided.Theminutes from thismeeting can be found in the second table inAnnex 5. The next civil societymeetingwilltakeplaceon30March2011afterpublicationofthedraftFinalReport.

StakeholderWorkshopOttawa,Canada

A full oneday consultation workshop was held on November 26th in Ottawa, Canada. Thirtytwomembersofcivilsociety,businessandpublicadministrationsconfirmedattendance to theworkshop,many of whom attended and commented atlength on the work delivered within the PreliminaryFindings document sent specially to these interested participants in preparation for the workshop.During theworkshop, the project experts presented the preliminary findings of the Interim Report.Discussionanddebatewasproductive.Commentsfromthatworkshopwereincorporatedinthisreport(seeAnnex4).

DigitalConsultation

Website

DS launchedaprojectwebsite to support theprojectsvisibilityaswellas toassist in facilitating thecollectionofstakeholderfeedback(seewww.eucanadasia.org).Thewebsiteisupdatedtocoincidewiththecompletionofeachphaseofthestudyandrelevantdeliverables.ItprovidesallrelevantinformationconcerningtheSIAsprogress,reports,meetingminutesandrelevantcontactinformation.

To date, thewebsite has received 1235 hitswith a bounce rate of 46.8%. The average time spentviewingthesiteis20minutesand50seconds.

DiscussionForum

ThewebsitesDiscussionForumalsoservesasacommunicationsplatformthroughwhichEuropeanandCanadian,aswellasAmericanandotherstakeholdersfromothercountriesthatconvincinglymakethecasethattheywillbeimpactedbyCETAareabletoabletoprovidefeedbackintotheEUCanadaTradeSIA.

ElectronicTradeSIANewsletter


33

Another aspect of digital consultation is the projects Trade SIA newsletter/email update which isdisseminatedtotheprojectsconsultationnetwork.Thisnewsletter isdistributedelectronicallyatkeypointsduringthestudy,coincidingwiththereleaseofeachreport.

InterviewsandEmailFeedback

In the course of the study,more than 350 civil society organisations, trade associations, academicinstitutionsandgovernmentagencieswerecontacted toparticipate in telephoneconsultations.ForacompletelistpleaseseeAnnex5.Initially,theresponseratewasoverwhelmingwithcloseto70repliesin the firstweek.However, interestwanedwhen itbecameknown that the study teamdidnothaveaccesstothecontentofCETAnegotiationsbeyondwhatwaspubliclyavailable.Nonetheless,severalkeystakeholder interviewswereconductedviatelephoneandnumerousrespondentscommunicatedtheirpositionsviaemail.

TheWayForwardWithConsultations

CommentsonthisdraftFinalReporttobeconsideredfortheFinalReportarewelcome.Theyshouldbesubmittedbeforethecutoffdateof11April2011.

2.4AnalysisTheresultsfromtheCGEmodel,E3MGmodel,deskresearchandconsultationswereanalysedaccordingto theprinciplesofcausalchainanalysis,withmore specific formsofanalysisemployedunder thisumbrella. Different types of analyseswere employed for different issues. As relevant, comparativeanalysis was employed. Even more specifically, policy analysis incorporating socioeconomic,economic/statistical, and legal analysiswasused.All analysiswasorganised in termsof the relevantindicators.

Themainpurposeoftheevidencebasedassessment intheSIA isto identifywheresignificant impactsareexpectedtooccur, i.e.themost importantways inwhichthetradeagreementbeinganalysedwillchange the status quo/baseline per relevant indicators. The significance of an impact has beenevaluated by expert opinion relative to an appropriate contextspecific benchmark, based on theresearchandanalysisdescribed in themethodologyherein. Impacts identifiedas less than significantarestilldiscussedasrelevant,particularlyifstakeholders,forexample,allegethatsuchimpactswillbesignificant.Also,theseimpactsmayreceivethebulkofattentioninananalysisunderacertainindicatoriftherearenotmoresignificant impactstobediscussedundersuchan indicator.Asaruleofthumb,withineach indicator, impactswith comparatively less significance receive lessdiscussion than thosewithmoresignificance.Thebelowtableprovidesanoverviewofhowdifferentdegreesofsignificancefor impacts aredescribed in this SIA.Once a levelof significance isdetermined, thepositive and/ornegativedimensionsofsuchimpactsaredescribedtotheextentfeasible.

Corelevelofimpact AccordingkeywordsinSIA

Significant significant,orsubstantial

Moderatelysignificant


34

Lessthanmoderatelysignificant>insignificant marginal,minor,orlimited

Insignificant nonexistentnegligibleinsignificant/notsignificant*

*indicatesincreasingdegreeofsignificanceamongkeywords

Coreformofanalysis

As envisaged in the SIA Handbook, causal chain analysis was the fundamental form of all analysisemployedinthisSIA.Causalchainanalysisentailsreviewing impactsfromabaselineandsubsequentlyalongasequenceofpotentialresultingimpacts.Thisprocesswasfollowedforeachindividualindicatoremployedintheassessments,asindicatorsareonlyusefulinpredictingfuturetrendsinsomuchastheyfirst consider past and present trends in the absence of the trade agreement (the baseline).Subsequently,making a causal link between existing (past and present) trends and potential futuretrends requires a thorough risk assessment: identifying possible risks, and analysing the linkagesbetweenthecauses/sourcesofrisksandthepossibledamages.

Morespecificformsofanalysis

Comparative analysis was a key tool used in a significant portion of the economic, social andenvironmental sustainability impact analyses for this SIA. Comparative analysis as used in this SIAconstitutes reviewing trendson similar indicatorswith those employed in this SIA after signatureoftrade/economic agreements or policies comparable to CETA (in terms of breadth and scope) withcomparablecountries(consideringthelevelofdevelopmentoftheEUandCanada).Herein,effortsweremadetoensurethat(a)theindicatorsthemselves,(b)theprovisionsofthetrade/economicagreementsor policies, and (d) circumstances of the countries (in terms of size and structure of economy, andnuances in the economic, social and environmental spheres) thatwere used are all relevant to ananalysisofCETA.AssessmentsondifferentcomponentsofNAFTA, forexample,wereoftenusedasafoundation for comparative analyses. The informationused to create these comparisonswas largelytakenfromdeskresearchandconsultations.

Specificapproachestoanalysispereachofthe3pillarsofsustainabilityareasfollows:

Economic assessments in the sectoral analyses focused largely on the resultsof theCGEmodel andincorporated information from desk research and consultations;while economic assessments in thecrosscutting issues section focusedmore on statistical and economic analysis built on informationoutsidetheCGEmodel,includingdeskresearchandconsultations.

The social assessments in the sectoral analyseswere based on the potential outcomes arising fromestimatedeconomic impacts,particularly intermsofprimaryconcernsoveremploymentcreationandjobdisplacement,aswellastheimpactonlabourstandards,health,securityandculture.

The social assessments in the crosscutting issues sectionsweremade through a varietyofdifferentformsofanalysisdependingonthe issues, including,amongothers,socioeconomicanalysisfollowingtheprinciplesofcomparativeanalysis.

Theenvironmentalassessments inthesectoralandcrosscutting issuessectionsweremadethroughavariety of different forms of analysis depending on the issues, including, among others, statisticalanalysisoftheresultsoftheE3MGmodel,andcomparativeanalysis.


35

Legalanalysiswasapplied inassessingall threepillarsof sustainability specifically in thegovernmentprocurement, investment,competitionpolicy,and IPRsectionsofthecrosscutting issuesassessment.Such analysis was combined with the other aforementioned forms of analysis to provide acomprehensiveassessment.

2.5PolicyRecommendationsAsafinalstep,aseriesofpolicyrecommendations,alsocalledflankingmeasures,werecreatedbasedon the results of the sustainability analyses. These measures cover both enhancement andpreventative/mitigationmeasures,i.e.measuresneededtoreinforcekeypositivesustainabilityimpactsandtopreventoratleastmitigatemajornegativesustainabilityimpacts.Anumberofstepswereundertakentofacilitatetheprocessofdevelopingthepolicyrecommendations.First, individual experts created a brief bulletpointed summary of all themajor impacts from theirsectionsofthesustainability impactassessment.Thishighlighted issuesthatdeservedtobeaddressedwithpolicyrecommendations.Itwasthenconsideredthatrecommendationsshouldgenerallyfitwithinthree main categories (i.e. trade measures and cooperation measures). A detailed list ofrecommendations was then brainstormed, based upon best practice for formulating suchrecommendationsassharedamongstudyteammembers.Therecommendationsandtheimpactstheyareintendedtoaddresswerethenalsocompiledinanabbreviatedforminachart.

Attention was paid to making sure all recommendations are practical. It was considered that therecommendations tobemade in thisSIAwilldiffer inmanyways from thosemadeonpastSIAs,onereason being that past SIAs have focused on EU trade with developing countries and emergingeconomies.


36

SUSTAINABILITYIMPACTASSESSMENTS

3.MacroEconomicAssessment6Summary:TheCGEmodelestimatesthattheCETAwill leadtooverallgains inwelfare,realGDP,totalexportsandwagesinbothCanadaandtheEUoverthelongterm.Whilethesegainsareexpectedunderthetwoscenariosmodelled intheeconomicassessment,thegainsareexpectedtobehigherunderanagreement that offers a higher degree of services liberalisation. Third countries are estimated toexperienceminordegreesofwelfare lossasa resultof theAgreement, though theoverall impactonthesecountriesisinsignificant.

INDICATOR:Welfare

In theGTAPmodel,welfare ismeasuredby EquivalentVariations (EVs).7Table3 suggests that tradeliberalisationundertheCETAwillleadtowelfaregainsintheEUandCanadaoverthelongterm.Ascanbeseen,thegreatestgainswillbeachievedunderanagreementthatprovidesthegreatestamountofliberalisationinthetradeofservice(ScenarioB).

Table3:EquivalentVariation(MillionUS$at2004prices) ScenarioA ScenarioBEU27 2,687.12 3,400.98Canada 2,291.10 2,931.87

Thedecompositionofthewelfareeffects(aspresentedinFigures1and2)furthersuggeststhatunderthelessambitiousscenario,themajorcontributiontotheriseinwelfareforEUandCanadacomesfromthecutintariffsongoods.However,underthemoreambitiousscenario,thegainsfromservicestradeliberalisationare largerthanthegains fromtariffcuts.Atthesametime,however,thisdoesnottakeintoaccountpotentialwelfaregainsthatmayarisethroughinvestment liberalisation,whichcouldleadtogreatertradethroughforeignaffiliatesandincreasesinoutputthroughenhancedproductivity.

6Introductorynotes: Included in thissectionarespecificestimates from theCGEmodeloutliningexpectedchanges inbothCanadaand theEU in termsofwelfare,GDP,exportsandwages.These resultsare influencedby themodelsassumptionsregardingservicesandtariffliberalisation.Specifically,thetwoscenariosestimatedwithinthemodellingsimulationsare:

Scenario A: 100% reduction in tariffs and cuts in trade costs of services as employed in the 2008 Joint Study6multipliedbyafactorof0.6(i.e.lessambitiousliberalisationofservices)

ScenarioB:100%reductionintariffsandcutsintradecostsofservicesasemployedinthe2008JointStudy(i.e.lessambitiousliberalisationofservices).

ResultsfromtheCGEmodelshouldbeinterpretedasreflectingtheimpactoftheCETAitselfontheseindicatorsanddoesnotnecessarily imply overall changes,which could be further affected by exogenous factors. All estimated impacts are to beunderstoodasoccurringoverthelongterm(e.g.in10+years)afterfinalimplementationofanAgreement.Asdatalimitationsmade it impossible to incorporate investmenteffects into theCGEmodel, the results take intoaccount the impactof tradeliberalisationonlyanddoaccountfortheimpactfrominvestmentliberalisation.MoreinformationontheCGEmodel,itsassumptionsandthescenariosemployedcanbefoundinAnnex1.7Equivalentvariation(EV)isameasureofhowmuchmoremoneyaconsumerwo

eu-canada sia draft final report...

Documents