In the forthcoming days and weeks, we will be publishing regular updates on issues relevant to Brexit. Today we look at one possible model of a post -Brexit trading relationship between the UK and the EU based on the Comprehensive Economic and Trade Agreement (“CETA“) being negotiated between Canada and the EU.

CANADA AND THE EU

Canada and the European Union have been negotiating a free trade agreement for approximately seven years. The agreement, called the Comprehensive Economic and Trade Agreement, or CETA is a significant and ambitious agreement which is broader in scope than the North American Free Trade Agreement between Canada and its #1 trading partner, the United States.

CETA would be the first agreement between the EU and an industrialized country, and it would cover a broad range of areas, including Non-Agricultural Goods, Agricultural Goods, Services and Investments, Government and Procurement, Intellectual Property, and Sustainable Development. It would establish commitments to cooperate in the areas of science, technology and innovation, and it would include broad coverage for intellectual property rights and enforcement. It would also create more opportunities for certain categories of workers to move across borders.

The EU and Canada completed their legal review of the agreement in February and seemed ready to sign the agreement later this year. However, following Brexit, the future of the deal is now uncertain.

On July 5, 2016 the European Commission announced that CETA requires approval of the European Parliament and the 28 EU member states (including the United Kingdom). That vote is expected to take place in October.

European state aid rules do not appear to apply to CETA

European state aid rules do not appear to apply to CETA. Pursuant to Article 8.9 Investment and Regulatory Measures, the Parties would not be prevented from continuing to grant subsidies, and footnote 7 indicates that subsidies here include state aid. CETA allows the Parties to preserve their individual rights to regulate certain policy objectives such as public health, safety, environment, and cultural diversity.

Audio Visual Media Services Directive (“AVMSD”) does not appear to apply to CETA

Article 9.2 states that the agreement regarding trade of services does not apply to audio-visual services of the EU and cultural industries of Canada. In addition, Chapter 12 of CETA (“Domestic Regulation”), states that licensing requirements, licensing procedures, qualification requirements, or qualification procedures do not apply to cultural industries for Canada and audio-visual services for the EU.

“Cultural industries” is defined very broadly in Article 1.1 of CETA to mean persons engaged in:

(a) The publication, distribution or sale of books, magazines, periodicals or newspapers in print or machine-readable form, except when printing or typesetting any of the foregoing is the only activity;

(b) The production, distribution, sale or exhibition of film or video recordings;

(c) the production, distribution, sale of exhibition of audio or video music recording;

(d) the public, distribution or sale of music in print or machine-readable form; or

(e) Radio-communications in which the transmissions are intended for direct reception by the general public, and all radio, television and cable broadcasting undertakings and all satellite programming and broadcast networking services.

CETA essentially creates an exception to the agreement for cultural industries in Canada and audio-visual services in the EU.

In most circumstances, Canadian television programs do not appear to be deemed “European Works” pursuant to AVMSD.

In most instances locally produced TV programs in Canada will not be considered European works for the purposes of quotas under the AVMSD. In general, a locally produced Canadian TV program will not be considered a European Work for the purposes of the AVMSD. However, if a Canadian work was co-produced by a member of the EU and the EU supplied the majority of the total cost, then that work will be deemed to be a “European Work” for the purposes of the AVMSD.

At this point, Canada is not planning on implementing equivalent laws to GDPR

Canada already has comprehensive data protection laws in place, and at this point, Canada does not appear to be taking any steps to implement equivalent local data protection laws to the GDPR. However, the current Privacy Commissioner of Canada has recommended that government institutions be obligated to conduct Privacy Impact Assessments for new or significantly amended programs and submit them to the Office of the Privacy Commissioner (“OPC”) prior to implementation. This is not unique to the GDPR though, as many provinces in Canada already require this before establishing new public health information systems. Another recommendation includes requiring government institutions to consult with the OPC on draft legislation and regulations with privacy implications before they are tabled, again analogous to the GDPR (Article 34, Recital 7), as well as some provinces in Canada.

Cultural industries are excluded from CETA, and therefore regular tariffs, taxes, and permits apply

On the day that CETA comes into force, 98% of all EU and Canadian tariff lines will be duty free. This will provide essentially free movement of goods, but the same cannot be said for people.

More flexibility and greater certainty have been implemented to the movement of people, due to certain provisions such as Chapter 10: Temporary Entry and Stay of Natural Persons for Business Purposes. This and other chapters in CETA allow for work agreements to be made, including for temporary entry that will facilitate the movement of contract employees, investors, independent investors, and business visitors.

However, as in all of its free trade agreements, Canada has excluded from CETA certain types of goods and services that are fundamental to the country’s social fabric, including goods and services associated with cultural industries. As previously mentioned, cultural industries (in Canada) and audio visual services (in the EU) are exempt from CETA provisions (see Articles 7.7, 8.2(3), 9.2(2)(c), 12.2(2)(b)(i), and 19-7(1)). The definition of “cultural industries” above appears to cover both the sale of DVDs and other similar cultural products, and the reference to “persons engaged in” appears to cover the cast and crew of film and video productions. Therefore, regular tariffs, taxes, and permits would apply, as cultural industries are not covered by the terms of CETA.