Overall, the CETA is seen as providing good opportunities for both EU and Canadian exporters

Overall, the CETA is seen as providing good opportunities for both EU and Canadian exporters

Euratex, the Brussels-based European Apparel and Textile Confederation, has hailed the completion of negotiations for a European Union - Canada Comprehensive Economic and Trade Agreement (CETA) - but says it regrets that origin rules have been weakened for 15 clothing products under the deal.

In the long term, the deal will increase the EU's garment exports to Canada by more than 91%, Euratex trade and industry manager Isabelle Weiler says, backing an impact assessment conducted by the European Commission in 2011. "We are confident that CETA will provide good opportunities for EU exporters in Canadian market."

The agreement removes non-tariff barriers and provides zero duties for textile and clothing products from first day of entry into force, she notes. The majority of duties currently stand at 18% on EU apparel exported to Canada.

That said, Euratex has concerns that for 15 clothing products, certain safeguards defining when a product can be deemed made in the EU or Canada have been weakened.

"We believe such an agreement should only benefit the signatory parties," Weiler says. This includes, for instance 46,000 units of men's or boys' cotton knitted or crocheted shirts exported from the EU to Canada. Under the agreement, they only need to be have their fabric cut or made up in the EU to be considered an EU product - other manufacturing and sourcing could take place elsewhere, and still the duty benefits would apply.

By contrast, for most clothing and textile products attracting benefits under the agreement, tougher origin rules apply. For instance, for woven apparel, this would involve weaving and making-up (including cutting); or making-up preceded by printing accompanied by at least two preparatory or finishing operations (such as scouring or bleaching) so long as unprinted fabric value does not exceed 47.5% of the product's value.

In 2013, EU woven apparel exports to Canada earned US$334m, and knitwear exports US$147m.    

Canadian concerns
On the other side of the Atlantic, Bob Kirke, the Canadian Apparel Federation's executive director, notes EU brands will have an advantage over Canadian ones, given that the EU's 12% clothing duties were already lower than those levied in Canada, and many EU member states already have lower labour costs than Canada.

He also stresses that given the general origin rules, many Canadian and EU companies will not benefit from CETA as they often source from Asia.

As with the EU exports, however, CETA outlines quotas for certain apparel attracting weaker origin rules that, if "sufficiently produced" can be traded duty-free. These include, from Canada to the EU: knitted or crocheted jerseys, pullovers, cardigans, waistcoats and similar articles (478,000 units); and knitted or crocheted T-shirts, singlets and other vests of textile materials (181,000 units).

These products are 'sufficiently produced' in Canada if assembled (both cut, or knit to shape, and sewn) there. "We would have preferred a simpler system," adds Kirke. Canada sold US$41m worth of woven clothing to the EU in 2013 and US$62m worth of knitwear.

Meanwhile, the CETA will eliminate the 3.7% EU duty on Canadian fur apparel, allowing Canadian manufacturers to better compete with their EU counterparts, such as in France and Italy, says Alan Herscovici, executive vice president of the Fur Council of Canada.

CETA might boost Canada's currently weak fur exports to the EU, he says. "The timing is good because of fur coming in so strong in popularity in Europe again." Canadian raw pelts are already sold duty free to the EU.

With additional reporting by Kitty So and Keith Nuthall.