While 98% of tariffs were removed through the Canada-Europe Trade Agreement (CETA), Canadian companies have not fully taken advantage of the opportunity.
In a new report, RBC highlights “serious challenges persist” for businesses, but there are five areas for growth, potentially unlocking $150 billion in exports to the EU: manufacturing, agriculture, critical minerals and energy, defence and space, and technology, AI and data.
The report, Continental Shift, notes that while Canada sells $28 billion of manufactured goods to the EU, it imports approximately $90 billion. The exception is aerospace where exports are up 60% since 2017 and which the report suggests could be a model to replicate.
"Aerospace is the template," the report says. "Extend the same supply-chain model to other areas of advanced manufacturing, including defence aviation, space, electric vehicle assembly, auto parts and build on existing ties for steel and aluminum."
On agriculture, regulations remain a barrier to increased trade, the report says, but there are opportunities in Canadian exports of grains, proteins and potash.
"CETA did not change the regulatory requirements to access the EU market, limiting its ability to translate into higher Canadian exports," the report says. Examples include restrictions on growth hormones in livestock, the use of peroxyacetic acid to control bacteria on meat carcasses, and testing for trichinosis, a disease Canada is free of. As a result, Canadian beef exporters use only about 3% of their duty-free quota when exporting to the EU.
On critical minerals, the report notes the EU's hostile relations with Russia and the U.S.-Iran war preventing oil from getting to Europe easily are an opportunity for Canada to export more energy.
"The EU wants to diversify its energy supply, and Canada its market base. The alignment could come from natural gas but also minerals, and nuclear fuel. With meaningful economic, emissions and energy-security gains at stake, resources could prove to be the biggest area of cross-Atlantic collaboration," the report says.
As the only non-EU country to be part of the Security Action for Europe, Canada should take advantage of joining the EU defence supply chain, the report says.
"Embedding themselves in Europe’s defence supply chains would help Canadian companies advance Ottawa-Brussels efforts to boost security cooperation." This includes collaborating on Arctic surveillance, supplying drones, water bombers and other defence equipment to Europe and allowing EU countries to use Canada as a launch pad for space crafts.
And, on tech, AI and data, the report says "Associate membership status could help open the door to the EU for Canadian companies," especially since Europe is investing heavily in AI and cloud.
"As Canada casts its net wider for new trade routes, Europe is emerging as a promising port of call,” the report concludes.
