December 19, 2013 – Investors from US and Mexico and other third-party countries will benefit from the Canada-EU trade deal when it comes to investing in Canada, according to a report released today by the C.D. Howe Institute. In “Who Else Benefits from CETA? Some Implications of Most-Favoured Nation Treatment,” respected trade lawyer Lawrence L. Herman concludes that investors from countries that have preferential trade agreements with Canada will be entitled to the same preferential benefits as EU investors under the Canada-EU trade deal.
In the first of a series of briefings by the C.D. Howe Institute on the Canada-EU Comprehensive Trade and Economic Agreement (CETA), Lawrence Herman considers the question of whether the trade pact will have beneficial side effects for Canada’s other trading partners, in the spirit of the “Most-Favoured Nation” rule of international trade law.
The author finds that under the terms of Canada’s WTO membership and numerous Foreign Investment Protection Agreements (FIPAs), the answer is no. However, with respect to investors and investments from the United States, Mexico, Peru, Chile and others with which Canada has preferential trade agreements (PTAs), the answer is yes.
“The North American Free Trade Agreement does not expressly restrict application of the Most-Favoured Nation rule with respect to investments, so the rule applies,” commented Lawrence Herman. “Investors from the United States and Mexico must be treated on an equal footing and receive the same preferences as EU investors or investments under CETA; likewise, our other partners in PTAs, such as Peru, Chile and Columbia.”
Among the benefits of CETA for EU investors will be the raising of the threshold for investment review under theInvestment Canada Act from the current enterprise value level of $344 million to $1.5 billion, noted Herman. “The increased review threshold will apply equally to investors from the US and Mexico as it does to investors from the European Union.”
“There is an important point to be made about uranium-sector investments, which are being loosened up for EU investors,” added Herman. “Because of the MFN rule, US and Mexican investors will obtain the same level of investment rights as EU investors in that sector. This is an important aspect of the CETA that will entail potential changes of significance in the Canadian uranium extraction and processing industry.”
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. It is Canada’s trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review. It is considered by many to be Canada’s most influential think tank.
Click here for the full report.
For more information contact: Lawrence L. Herman, Herman & Associates, Toronto, Senior Fellow of the C.D. Howe Institute and former international counsel at Cassels Brock & Blackwell LLP, lherman@hermancorp.ca ; or Daniel Schwanen, Associate Vice President, International and Trade Policy, C.D. Howe Institute, 416-865-1904