EU-Canada free trade agreement brings new market opportunities, particularly for SMEs

The EU-Canada Comprehensive Economic and Trade Agreement (CETA) aims to remove, in particular, those barriers to trade that increase the fixed costs of exports. This will benefit the exports and market access of small and medium-sized enterprises, as revealed by a study by VATT. So far, the goods or service exports of Finnish SMEs to Canada have remained low.

The CETA helps to comprehensively liberate service trade and public procurement. According to VATT’s study, this is likely to have a positive impact from Finland’s perspective: over the last few years, between 30 and 50 per cent of the domestic value added generated by Finnish exports to Canada has been attributable to service exports.

Until now, the Finnish companies operating on the Canadian market have mainly been larger ones. While major companies are also expected to benefit from the agreement, the impact is relatively more significant on SMEs. In addition to the increase in service trade, it is expected that thanks to the CETA, trade flows between Finland and Canada will more than double in the trade of motor vehicles and other transport equipment and increase significantly for the metal and electronics industry.

“However, in proportion to total exports in these fields to the world market, the changes are fairly small”, senior researcher Saara Tamminen says.

The consequences of the agreement for the Finnish economy as a whole are expected to be minor, yet positive. The impact of the agreement on the GDP will be approximately 0.04 per cent. This figure is slightly higher than the average impact on the EU, because many of Finland’s major export products belong to the product groups that the agreement is expected to benefit the most. Over the last few years, the domestic value added generated by the Finnish exports to Canada has amounted to between 0.2 and 0.3 per cent of Finland’s GDP.

Finland’s direct exports to Canada in 2011-2015 were estimated to have generated between EUR 350 and 450 million of domestic value added. A major share of the service exports originated from the industrial sectors. In addition to services, machines and equipment, as well as electronic products are important sources of domestic added value in Finnish exports to Canada.

A report on the financial impact of the CETA on Finland was commissioned by the Ministry for Foreign Affairs.

Research:

The expected economic impacts of the EU-Canada Comprehensive Economic and Trade Agreement in Finland. VATT Research Reports 187/2017

More information:
Saara Tamminen, senior researcher, +358 295 519 450
Janne Niemi, researcher, +358 295 519 433