CETA deal could boost EU-Canada mineral trade

By IM Staff
Published: Monday, 03 April 2017

With political ructions reshaping trading landscapes in North America and Europe, newly forged deals such as the recently approved Comprehensive Economic and Trade Agreement between the European Union and Canada take on increased significance, IM Correspondents Liz Newmark and Keith Nuthall, find.

European and Canadian minerals industries have broadly welcomed the European Parliament’s approval of the Comprehensive Economic and Trade Agreement (CETA) between the European Union (EU) and Canada, saying it will bolster already flourishing trade. 

The laboriously negotiated deal, the tax and quota liberalisation elements of which could take effect as early as April this year, will remove nearly 99% of tariffs on all goods traded between the EU and Canada and eliminate tax discrimination.

Despite fierce parliamentary opposition to the pact, including resistance from the Europe of Nations and Freedom group, whose co-chair, French presidential hopeful Marine Le Pen, condemned CETA as "terrible (…) undermining thousands of jobs in Europe", the majority of members of the European Parliament (MEPs) supported CETA and the deal was passed by 408 votes to 254, with 33 abstentions.

Europe’s lead negotiator for CETA, Latvian centre-right MEP Artis Pabriks, said following the vote on 15 February that "a very historic trade deal" between the world’s "best partners" had been secured.

Canadian minister for international trade, François-Philippe Champagne, added that CETA was the "most progressive trade agreement in the world". 

Critics of the deal have argued that the agreement will benefit only multinational companies; however, EU trade commissioner Cecilia Malmstrom said CETA would deliver economic advantages for small and medium-sized enterprises, through "lower tariffs, less bureaucracy and better access to the market".

A number of European industrial minerals associations have expressed their support for the deal. The European Ceramic Industry Association (Cerame-Unie) said CETA would offer its members better market access to Canada by reducing customs duties on some of its products.

"Although the EU already has a considerable positive trade balance with Canada, the European ceramics industry could further increase its export market potential once CETA is applied," a Cerame-Unie spokesperson told IM.

"Regarding ceramic goods, total EU exports [were worth] around €210m against imports of €4m in 2015," they added. While ceramic simport figures remained stable from 2009-2015, export income has fluctuated as part of a net upward trend from €126m in 2009 to €200m in 2013, although growth has since slowed down.

Cerame-Unie figures show that the EU ceramics exported to Canada currently face import tariffs of up to 9%. The highest duties include 9% tax on abrasives and up to 7% for refractories, technical ceramics and table and ornamental ware. Bricks and roof tiles have 3-8% tariffs, with wall and floor tiles carrying an 8% rate and sanitary ware is taxed at 7.5%.  

European mining industry group Euromines has also praised the CETA deal. "In general, we welcome such a trade agreement as we are in favour of free and fair trade," the body said.

Euromines backs the EU’s call for an EU-Canada mineral investment facility (MIF) to be established in the wake of CETA to help guarantee access to a secure and sustainable suppy of raw materials for EU industry.

"We are currently working with the European Commission on a feasibility study proposal for this facility which was initiated in January 2017," a Euromines spokesperson told IM

"The study [undertaken by accountancy firm EY], which will encompass associated events and stakeholder dialogue, should analyse the current state of co-operation between the EU and Canada on the mining sector and related technology and services," they explained.

As well as concluding how to promote and structure co-operation, the study is also tasked with examining options for the best design of a potential MIF.

Bilateral benefits

Further underpinning the CETA deal and the MIF proposal is the fact that a number of European companies have invested in the Canadian mineral industry and vice versa – an area that Euromines believes has the potential to expand.

"Following the [global] economic crisis, exploration investment in Europe in general has been down and CETA and [an MIF] might assist in rebuilding bilateral investment," it said. "CETA will not only be of relevance for the exploration and mining companies as such but also to suppliers for technology and services."

The Industrial Minerals Association of Europe (IMA-Europe) told IM it does not have an official position on CETA, but added that: "As a trade organisation, we welcome the possibility to increase exchanges with Canada." It also pointed to the 125 industrial organisation signatories to a joint declaration for an EU industrial strategy on 16 February this year, which it says could benefit from the deal.

CETA has been warmly received by the Mining Association of Canada (MAC), a body that lobbies the Canadian government to secure such trade deals, since the majority of Canadian mineral output is exported. 

"The mining sector relies on access to [overseas] markets to sell its products," the association said. "Any free trade and investment protection agreements are incredibly important for access, especially for key markets like the EU."

The MAC is also pressing for additional trade deals with other major markets such as China and India and wants the Canadian government to invest in the necessary infrastructure to transport minerals from often remote Canadian mines to North American sea and lake ports. 

"Such investment needs to be staged in parallel with trade negotiations," MAC told IM. "Improvements should be made to rail services. We need ports and roads and in a lot of our remote northern regions, that infrastructure is lacking," it added.

Building on rock


Mineral trade between the EU and Canada is already healthy, judging by statistics from EU statistical agency, Eurostat. 

The EU imported €61m ($64.1m*)-worth of potassic (potash-based) fertilisers from Canada in 2015, while EU exports of mineral-based chemicals to the North American country, including  €79.4m of nitrogenous fertilisers (largely urea) in 2015,  represent a significant source of foreign exchange earnings for European companies.

Aside from potash products, the EU also imported €9m-worth of Canadian bentonite in 2015; €7.3m of titanium oxides; and €1.8m of polyphosphates. Imports of salts, sulphur, earths, stone, plastering materials, lime and cement from Canada collectively reached €27.4m that year, according to Eurostat (see Table 1).

The bloc further imported €21m-worth of Canadian glass products and ceramic materials worth €3.5m in 2015, although these figures were dwarfed by volumes going the opposite way, with EU exports of ceramics to Canada reaching €196m that year and glassware shipments totalling €140m.

Combined EU exports of salts, sulphur, earths and stone, plastering materials, lime and cement were valued at €27m in 2015 (see Table 2), including €6m-worth of cement.


Potential shifts in trade relations

Some Canadian exporters are less concerned about the EU market than they are with sales to buyers in neighbouring US and growing markets in Asia. 

Canada produced Canadian dollar (C$) 6.6bn ($4.9bn)-worth of potash in 2015, according to the Natural Resources Canada. Bill Cooper, public affairs manager at Canadian potash giant Potash Corporation of Saskatchewan (PotashCorp), told IM that his company has "a very small amount of sales into Europe."

But with future trade relations between the US and Canada uncertain under the new Donald Trump-led Republican administration, which has pushed for increased protectionism in the US and demanded a renegotiation of the North American Free Trade Agreement (NAFTA), Europe may become an even more important trade partner for Canada.

PotashCorp say they have only "very small amount" of potash sales into Europe.
Source: PotashCorp 

There is, however, already stiff competition for European custom in raw materials. "Europe has its own domestic [potash] supply from Germany and Spain and there are imports from Belarus," one Canadian industry official, who preferred not to be named, told IM.

Despite these misgivings, CETA is still regarded as an opportunity to increase Canada-EU commodities business, including trade in agricultural products which would have knock-on benefits for domestic mineral industries. 

"As the representative of an industry that trades with 80 countries worldwide, [our organisation] is supportive of agreements (…) that have the potential to boost trade," said Garth Whyte, CEO of industry association Fertilizer Canada.

"What is good for farmers is good for the Canadian fertilizer industry. CETA will generate growth in the farming community, and those benefits will no doubt be extended to our industry," he added.

*Conversions made March 2017