CETA and USETA: Pieces of an Atlantic Jigsaw Puzzle

February 25, 2013

It is likely seen as early days given the very recent announcement of the intention of the EU and USA to conduct "free trade" or "economic and trade" agreement negotiations, but with the near advent of CETA, recent protestations aside, what does this mean for Atlantic trade? The third, and ever more powerfully growing member of NAFTA, Mexico, already has a free trade agreement with the EU to twin with NAFTA. How will the existing Mexican deal and the initiation of negotiations of an EU-USA deal promote and affect the final outcome of the CETA negotiations? How will the jigsaw pieces in place, and those being negotiated, fit together to form the future of Atlantic trade and investment?

Critical to the interweaving of the NAFTA, CETA and USETA are the applicable Rules of Origin governing free(r) trade. To the extent that there are differences in the applicable Rules, this may enhance origination/production site selection in one country or area over others. Should they be negotiated to permit cumulation, for example US produced goods qualifying as NAFTA originating being considered originating in the country of export (either Mexico or Canada) for CETA or Mexico“EU treaty purposes, the production site decision will become more flexible though the analysis could become extremely complex. This could be made even more complicated by phasing in provisions relating to eventual duty free treatment. Perhaps more important will be the treatment and dovetailing of non-tariff barriers, including language and sizing for labelling purposes and product regulation. Resolving differences on an Atlantic basis could be a monumental task.

Of course free trade is not only about goods ” it usually covers investment, services, mobility, procurement, and other elements. Each of these will have to be analyzed by business to determine decisions including production and distribution site location, investment and tendering priorities and staffing issues. Simply put, an Atlantic treaty zone will have a huge impact on any business located in, or doing business in, the EU or NAFTA region.

The future of Atlantic trade and investment is about to take a very interesting turn. Some may feel that a positive outcome of the negotiations is unlikely in the foreseeable future. I prefer to be more optimistic. If anything, the world is becoming smaller as a result of business decisions ” it's only fitting that governments catch up by implementing trade/investment structures that reflect this.