Should Canada strengthen its economic ties with the EU?

Crina Viju-Miljusevic, Carleton University

crina.viju@carleton.ca 

March 30, 2025

It is no wonder the discussion about Canada joining the EU has gained renewed attention, especially as the current US administration has put heavy pressure on both Canada and the EU in political, economic, and security matters. As like-minded partners, Canada and the EU should explore ways for further collaboration to help them cope with the short-term impacts of US policies and develop long-term strategies. The central question raised by Frédéric Mérand is whether Canada should become an EU member state or pursue other models of collaboration, such as those followed by the UK, Norway, or Switzerland. In response to his article, my colleagues tackle this question from various legal, political, and economic angles. However, in this response, the focus will be on a narrower aspect: the regulatory divergence between the EU and Canada, particularly in the agricultural sector.

It is important to acknowledge that the process for Canada to become a full EU member state would be extremely long and complex. Every EU candidate country must implement the acquis communautaire, a comprehensive body of EU laws and regulations, before being eligible to join the EU. This process ensures that new members fully align with EU standards and legal frameworks, facilitating their integration into the Single Market. The acquis is divided into 35 negotiation chapters, one of which is food safety, veterinary, and phytosanitary policy. This chapter is particularly significant as it ensures that candidate countries adopt strict EU standards on food production, animal health, plant protection, and public health. Compliance with these standards requires the establishment of robust regulatory frameworks, inspection systems, and enforcement mechanisms to meet EU safety and quality requirements. Additionally, it involves harmonizing national laws with EU regulations on hygiene, traceability, animal welfare, pesticide use, and disease control among others.

Looking specifically at Canada, it shares deeply harmonized regulatory frameworks with the US, particularly in agriculture and food products, due to decades of collaboration and agreements like NAFTA. Most of Canadian and American product standards are either identical or mutually recognized, which allows for smoother cross-border trade with fewer regulatory obstacles. In contrast, Canada’s trade with the EU faces greater challenges due to differing regulations on food safety, labeling, and sanitary measures. For example, the EU’s stricter approach to genetically modified organisms (GMOs) and hormone-treated beef imposes additional compliance burdens on Canadian exporters, limiting market access despite reduced tariffs. As a result, Canada’s regulatory alignment with the US market makes trade far more seamless and integrated.

While many regulations have legitimate purposes, such as ensuring food safety and preventing fraud, they can also be used as disguised trade restrictions, making it difficult for policymakers to distinguish between necessary regulations and protectionist measures. To address these concerns, the World Trade Organization (WTO) established two key agreements during the Uruguay Round. The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) requires that trade barriers based on food safety and animal and plant health be scientifically justified. However, this has led to significant disputes between Canada and the EU, concerning both the role of science and whether other factors should influence SPS regulations. The Agreement on Technical Barriers to Trade (TBT) governs regulations that fall outside the SPS agreement, including labeling requirements. A growing number of consumers demand more information on the ethical and environmental aspects of food production, such as animal welfare and genetically modified organisms. An example of a Canada-EU trade dispute under the TBT is the EU's ban on Canadian seal products, citing animal welfare concerns. Canada challenged the ban, arguing that it acted as an unjustified trade barrier, especially as the EU did not consider the scientific and cultural practices around seal hunting in Canada. This dispute highlights how regulatory measures, even when framed as public welfare concerns, can serve as barriers to trade.

Beyond regulatory and structural changes, another critical concern for Canada would be the impact on its trade relations with the US, which will remain an important trading partner. If Canada were to join the EU, it could face significant restrictions in its ability to engage with the US market, as EU membership would necessitate Canada's adherence to the EU's common commercial policy. This would result in a restriction of Canada's ability to negotiate its own trade agreements independently with the US, creating a trade conflict between two major economic powers—the EU and the US.

Furthermore, joining the EU could result in Canada's having to conform to the EU Common Agricultural Policy (CAP), which might not always align with Canada’s interests. For instance, Canada could find itself locked into the EU’s agricultural subsidies, stricter regulations for the production of GMOs and others that conflict with its agricultural policies and the US trade interests, leading to potential trade disputes.

In short, Canada’s path to EU membership would not only be time-consuming and difficult due to the need for substantial reforms across a broad range of sectors, but would also restrict Canada’s flexibility in trade relations with the US, which despite its protectionist policies will remain an important market for Canadian goods and services.

Therefore, while deepening economic ties with the EU is beneficial in many ways, full EU membership presents significant trade-offs, particularly when it comes to the integration of Canada’s regulatory and economic systems with both the EU and the US markets. To fully capitalize on the momentum for closer ties, Canada and the EU must be sure that they take full advantage of the Comprehensive Economic and Trade Agreement (CETA), push for its full ratification and strengthen their economic relations in sectors of common interest through frameworks such as those developed by the EU with the UK, Norway or Switzerland.

CETA is a third-generation trade agreement, meaning it addresses not only traditional tariff reductions but also regulatory and administrative barriers. Although cooperation remains voluntary, CETA fosters trust, facilitates trade and investment, and helps protect public health and the environment. However, the implementation of such deep agreements is complex and slow due to the involvement of multiple stakeholders with differing interests, as well as political and bureaucratic inertia. Unlike first- and second-generation trade agreements, which deliver benefits more quickly, third-generation agreements require significant time and effort before their advantages are fully realized. CETA establishes specialized committees and a dedicated chapter on regulatory collaboration to promote trust and facilitate trade and investment. Thus, the work of these committees should be expedited, and their findings and policy proposals implemented. Additionally, a five-year evaluation of CETA by the Government of Canada showed that the utilization of CETA preferences in 2022 for Canadian exports to the EU was 65.4%, while for imports from the EU, it was 59.5%. While these utilization rates vary by sector and EU member state, there is clear potential for increased benefits if these preferences are fully utilized.

In conclusion, while the idea of Canada joining the EU is intriguing, the regulatory and economic challenges make full membership an unlikely and impractical pursuit. Instead, Canada should focus on strengthening its existing ties with the EU through CETA and other collaborative mechanisms that preserve its economic independence while maximizing trade opportunities.