Canadian Lawyer InHouse

35 CANADIANLAWYERMAG.COM/INHOUSE JULY 2016 I n d u s t r y S p o t l i g h t compete against lower-cost economies, es- pecially those in southern Europe, and in some of the Asian and Latin American TPP signatories. But trade lawyers say that risk is likely less important than the cost to fi rms in a relatively small economy such as Can- ada of not joining a big international deal, and then being squeezed out of the markets they are in at present. "You have to look at the relative size of the Canadian market versus all these other markets, and in particular the U.S. market, and manufacturers in Canada succeed in part because of their ability to export to a market like the United States," says Greg Tereposky, a partner in the Ottawa offi ce of Borden Ladner Gervais LLP and a former trade policy offi cer at Canada's department of external affairs and international trade. "So when these trade agreements come up we have to look at it from the perspective of how do you preserve what we've got in the U.S. market. . . . If Canada was not part of that [TPP] agreement, it would have been facing a host of new competitors in the U.S. market for all our exported goods, without us having a similar competitive advantage in terms of reduced tariffs for products or any sort of reciprocity to go into these countries." Of the two deals, CETA is closer to rati- fi cation — it was drafted in English and is now being translated into French, and the other 21 EU languages, to be followed by steps to make policies, regulations, and leg- islation conform with its goals. And as its name implies, the agreement goes beyond the broad tariff reductions of a traditional free trade agreement, with a heavy focus on non-tariff barriers. It will open up the market for government procurement, har- monize standards for goods sold in various markets, and allow far more freedom of movement for company employees, mak- ing it easier for a company in one place to bid on a contract in another and then send in the specialized staff that will be needed to make sure everything works as planned. But Canadian companies need to be ready to work with Ottawa to ensure their needs are met as the two sides iron out details on issues like harmonization. "If there are important barriers to entry in the European market, it's important to recognize those and see if you can engage the Canadian government in a relation- ship with those issues because they are go- ing to be working hard with the Europeans on harmonization," says Martin Masse, a partner at Norton Rose Fulbright Canada LLP in Ottawa, who describes the CETA as a "trade agreement plus." "From a manu- facturers' perspective, the EU is a highly regulated environment and the complexity of those regulations can add to the adminis- trative cost of doing business with Europe." Ratifi cation of the TPP is further down the road, given a raft of political obstacles and uncertainties, including the hotly con- tested U.S. presidential race. Even Demo- crat Hillary Clinton, viewed as the most pro free trade of the candidates still in the race, might well seek amendments to some of the pact's provisions, while Republican front- runner Donald Trump has described the TPP as a disaster. The Conservatives were Canada's negotiators in the agreement, and Liberal Trade Minister Chrystia Freeland signed the pact in February. But the new government has two years to ratify the deal, and it is inviting public comment. "The Government of Canada is commit- ted to being transparent, open and consulta- tive with Canadians on the TPP," says the government's web page on the issue. "As part of this commitment, the Government of Canada has already consulted and will continue to consult Canadians, as well as undertake full Parliamentary debate." But trade lawyers say Canada must look both at the likely advantages and disadvan- tages of the TPP itself, and at the likely im- pact of excluding itself from the deal. "The comparison is not so much will manufacturers do better under TPP than without TPP. It's will manufacturers do better if Canada is in TPP or out of TPP. There is no world in which TPP is not going to exist," says Masse. "There are certainly advantages in terms of the supply chain. . . . But at the same time we are reducing barri- ers in some very signifi cant tariffs in relation to countries that have some cost advantages over Canadian companies, so we will have to see how that plays out." Clifford Sosnow, a partner in the Ot- tawa offi ce of Fasken Martineau DuMou- lin LLP, says exporters need to be aware of exactly what's in the long and complicated agreements, in order to take advantage of new procurement rules, and general coun- sel need to be aware of the ways that Ca- nadian laws will have to change to accom- modate the deals. "Identify where your markets are, iden- tify where you think your sources of supply might be, and then understand what the rules are to help you extract an advantage in terms of the dollar value. It's as simple as that," he says. "What we tell all in-house lawyers is to understand the ratifi cation process and understand the changes in the rules that will come about as a result of Canada bringing the TPP into force. It will have a signifi cant impact on your compa- nies, and if you don't comply with the rules you will face the penalties associated with them. Understand where you can intervene, understand, if there is no clarity, how you can go about seeking that clarity." It is still not clear which companies, or which manufacturing sectors, will end up as the winners from the two big trade deals, and where the biggest risks will be. But Turi, from the manufacturers' association, says the main complaint he's hearing is the length of time it's taking to get everything sorted out. "I think that we are hearing more positive things than negative things. Really the main negative is what's taking so long? Why is ratifi cation taking so long, what is the delay in respect to implementation?" he says. IH Identify where your markets are, identify where you think your sources of supply might be, and then understand what the rules are to help you extract an advantage in terms of the dollar value. It's as simple as that. CLIFFORD SOSNOW, Fasken Martineau DuMoulin LLP

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