Is Newfoundland Putting CETA At Risk?

On January 19, the Newfoundland government issued a news release that indicated that it was suspending its participation in existing trade agreements as well as trade agreements currently being negotiated by the Federal government. This means that the government of Newfoundland and Labrador will not enforce any provision found in these agreements that fall within its jurisdiction.

The Newfoundland and Labrador government’s announcement is unlikely to amount to much, and may do more damage than good for the economy of Canada’s eastern-most province.

The reason for this is that the federal government has changed the terms of an agreement on the creation of a $400 million cost-shared fisheries investment fund for Newfoundland and Labrador, which was negotiated in the context of the CETA negotiations in which the provinces were actively involved (i.e. it is meant to compensate potentially negative consequences that CETA could cause for the fisheries industry).

The Newfoundland government argues in its communiqué that the “[f]ederal government’s failure to honour the terms of this fund is jeopardizing CETA for all industries, economic sectors, and indeed all Canadian and European Union citizens”. Wow! Who thought that one of the smallest provinces in Canada had such power and influence over Canadian and European economic well-being?

But is it really so? Do we need to be afraid by the Newfoundland government’s decision? Here’s a list of reasons why we do not need to be:

  1. CETA will happen regardless of what the Newfoundland government does. The deal is already signed and the ratification process does not involve the provinces. It involves only the federal government and the European Union (EU) (and even the potential ratification by EU national parliaments is not a real obstacle to CETA provisions applying once approval is obtained at the supranational level).

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  1. The Newfoundland government’s threat is an empty one for the time being, since CETA will not come into effect before 2016 (if not 2017). So it is not really suspending anything. As for the other trade agreements currently under negotiations, the provincial government is only hurting itself since it will no longer provide any input into the negotiations. As we say in French, “les absents ont toujours tort”.


  1. Should the Newfoundland position hold until CETA comes into effect, Newfoundland is likely to end up on the losing end if its behaviour (or, more appropriately, lack thereof) means that its economy loses out to other provinces for both European and rest-of-Canada investment. (This loss could come, for example, from firms that want to take advantage of labour mobility provisions negotiated by the provinces with EU partners in the implementation phase of CETA.)


  1. The only area where Newfoundland could gain is public procurement. By suspending Newfoundland’s participation in CETA, provincial and municipal governments would be able to continue discriminating against European firms in spite of CETA provisions eliminating this practice. However, this could mean that Newfoundland taxpayers end up paying more for provincial and municipal public spending if the absence of European bidders lessens effective competition. In addition, the Newfoundland government’s threat is unlikely to have a substantial effect on Europeans’ position vis-à-vis CETA, since the Newfoundland public procurement market is small. In other words, the Newfoundland government’s decision is unlikely to scare the Europeans and force them to put pressure on Ottawa.

See also:

  1. Finally, any economic benefit that could arise from reneging on CETA commitments is unlikely to be greater than the loss of a $400 million fisheries investment fund.

In conclusion, the Newfoundland and Labrador government’s announcement is unlikely to amount to much, and may do more damage than good for the economy of Canada’s eastern-most province. It seems that Ottawa can afford to play the long game here. CETA is not at risk.

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