What would being an 'associate member' of the EU mean for the Canadian economy and businesses?

On Sept. 16 European Union president Ursula von der Leyen made a surprise invitation to Canada to become the European Union’s first “associate member.” However, this designation doesn’t exist yet and it’s not clear what privileges it would give Canada. While Prime Minister Mark Carney looks to strengthen other alliances as relations with the United States fray, Canadians may be wondering what this potential new relationship means for the country. The Financial Post spoke to international business professors and experts to determine what this new partnership could mean for Canada’s economy, how it fits with our existing trade agreement with the EU and what Canadian businesses can expect moving forward.

What would it mean to be an “associate member” of the EU?

Because Canada is not geographically in Europe and is not looking to become a full member of the EU, “I think what (associate membership) represents is an intent to deepen economic and other forms of co-operation between the EU and Canada,” said Michael McAdoo, a partner and director in the global trade and investment practice at Boston Consulting Group Inc.

During a news conference in Strasbourg, France, on Thursday Carney proposed an alliance with deeper co-operation in key economic sectors, in education and youth programs through the EU’s Erasmus+ program and in research and innovation funding through the EU’s Horizon program.

Julian Karaguesian, an economic lecturer at McGill University, said he does not expect the partnership to allow for the free movement of people or a unified financial system, as full EU member status would, though it may potentially include “a deeper, broader free-trade agreement.”

It could look like what was on the table for Ukraine. Earlier this year, German Chancellor Friedrich Merz floated the idea of Ukraine being granted the status of temporary associate member in the EU, which would have allowed the country to participate at EU summits and meetings, but with no voting rights (which Ukraine rejected).

“So far, we have an invitation, without an agreed set of rights for Canadian businesses,” said Andreas Schotter, a professor of international business at Western University’s Ivey Business School, in an email. “It is too early to assume this means unrestricted market access or the right to work in Europe.”

Carney said the final structure of this alliance will be put up for debate and a final vote in Canadian Parliament.

How could CETA fit into this enhanced partnership?

The enhanced partnership would not need to address traditional aspects of a trade relationship, as Canada and the EU have an existing deal known as the Canada-European Union Comprehensive Economic and Trade Agreement (CETA).

However, CETA is not yet in full effect. While 17 EU countries have completed ratification, 10 have not. “Most of the agreement has applied provisionally since September 2017, including most tariff cuts on qualifying goods,” Schotter said, adding that investment protection and an investment court for dispute resolution still await full ratification.

Under CETA, about 98 per cent of EU tariff lines are duty free for Canadian exports. It allows for free trade in many industries, but not all, Karaguesian said.