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Understanding How Free Trade Agreements are Negotiated

With Canada and the Association of Southeast Asia Nations (ASEAN) to begin negotiations towards a Free Trade Agreement (FTA), it is important that companies and individuals understand the negotiating process and how they might be able to provide input and feedback to the negotiating team.

In this 3-part blog series, CABC Advocacy Chair Geoff Donald shares insight on the trade agreement negotiation process and encourages Canadian and ASEAN companies to join the CABC in its mission to facilitate closer Canada-ASEAN trade and investment ties.

Why negotiate a free trade agreement?

The purpose of any free trade agreement is to liberalise trade between partners and the benefits of such an agreement are maximised through the greatest possible coverage of goods and services.

For Canada, its trade agreements initially focused on the removal of tariff barriers and import restrictions. Trade agreements then shifted towards a focus on services, intellectual property, investment, and non-tariff barriers. The current Canadian government pursues a Progressive Trade agenda that looks to include provisions on issues such as greater transparency, trade and gender, workers’ rights, the environment, and small- and medium-sized enterprises in free trade agreements.

ASEAN countries have signed free trade agreements on a bilateral, regional, and global level, but these agreements focus on economic-based issues instead of the more progressive issues found in recent Canada trade agreements.

Understanding the free trade negotiation process

The process for negotiating a free trade agreement is a long and technical one that includes multiple rounds of discussion and engagement with various stakeholders. To get a better understanding of the process, let’s look at the process from the Canadian point of view.

Identifying objectives

The negotiating process starts with Canada identifying its interests for the free trade agreement and the development of the specific objectives that negotiators should achieve to meet those overarching interests. These objectives can be broken down on a sector-by-sector basis or by subject area. These objectives will form the basis of Canada’s negotiating mandate which must be approved by the Federal Cabinet.

Expressing intent

Next, the Government of Canada will table in the House of Commons a Notice of Intent of entering free trade negotiations. This notice must be tabled at least ninety calendar days prior to the commencement of such negotiations. For the Canada-ASEAN Free Trade Agreement, Minister Mary Ng, tabled the Notice of Intent on November 24, 2021. This means that the earliest date formal negotiations can begin is February 22, 2022.

In addition, the objectives for the free trade negotiations must also be tabled at least thirty calendar days prior to the commencement of such negotiations. At this time, these objectives have not yet been submitted to Parliament.

During this time, the Government of Canada will appoint a chief negotiator for the free trade agreement. This individual is usually a member of Global Affairs Canada (which is the lead federal department on international treaty negotiations) and a professional diplomat. Canada has a strong bench of experienced trade negotiators due to its history of trade negotiations.

Start of formal negotiations

For the formal negotiations, working groups are established for each of the issue areas of the negotiation. In the case of Canada’s negotiation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), there were over 21 separate working groups, which demonstrates the immense complexity and scope of a multilateral negotiation.

The actual negotiations are conducted in rounds with each round hosted by each party on an alternating basis. Each negotiating team lasts between three to five days. At the end of each round, a consolidated text is produced to confirm what has been agreed and to function as a record of the round.

At the conclusion of negotiations, the draft text is typically endorsed by each side’s chief negotiators, and the text of the agreement is sent for a legal review or “legal scrubbing” and translations. This is done to make sure that the text the negotiators have agreed on meets each side’s existing international obligations and to confirm that the language of the agreement meets the intention of the negotiators.

Signing to formalise the agreement

Once a free trade agreement is finalized and translated, the Cabinet will approve the document, and the Minister of Foreign Affairs or their designate can sign the agreement. The agreement is then tabled in the House of Commons for 21 days of debate and consideration.

In addition, legislation required to implement the agreement is often required and must be passed by Parliament and receive royal assent. At the time that the implementing legislation is introduced into Parliament, the Government will also table an economic impact assessment of the agreement as required by law.

Only after all the regulatory changes and legislative requirements are met, will the free trade agreement come into force.

The good news is that Canada is open to the process and progress of its trade negotiations and makes information available. However, this openness does require consent from a negotiating partner so the amount of information regarding each trade negotiation can vary.


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