The Canadian government has elected not to renew a space-related section of the Comprehensive Economic and Trade Agreement (CETA) with the European Union (EU) after a 2022 report by the Canadian Space Agency (CSA) said no Canadian organization reported being able to access any EU contract covered by the agreement.
“You can find a notice indicating that CSA government procurement coverage under CETA [the Comprehensive Economic and Trade Agreement] was removed as of Sept. 21, 2022, here,” a CSA official told SpaceQ in an e-mail.Â
Canada had the option to opt out within the first five years of the agreement, first ratified in 2016. If Canada had chosen not to opt out within that period, the agreement would have been permanent.
“There are no major impacts expected on CSA projects or procurement,” the CSA official added. “There are also no impacts expected on business-to-business relationships between Canadian and EU companies, or on Canada-EU and Canada-European Space Agency collaboration,” the CSA official added.
‘No Canadian organization reported receiving a European contract’
We will speak more about the details of CETA below, but first more details about the 2022 report from the Canadian space industry. On Aug. 5, CSA published feedback from 70 companies, universities and research organizations who spoke about CETA and the post-Brexit Canada-UK Trade Continuity Agreement (Canada-UK TCA) during consultations between 2017 and 2022.
CSA also used a state sector survey to assess statistics on how Canadian organizations were able to access CETA and Canada-UK TCA, including the number of bids on contracts under the two trade agreements. All the data pointed to likely the main reason that CETA was not renewed: “To date, no Canadian organization reported receiving a European contract covered by the trade agreements,” the CSA wrote.
Officials emphasized, however, that industry remains satisfied with Canada’s cooperative membership with ESA “as it provides meaningful industrial opportunities for the space sector,” and the lessons learned from the experience are summarized at the bottom of this article.
Nearly a decade of concerns
Allowing CETA to expire comes after years of concern by the Canadian space industry about its implications. The five-year agreement was ratified by Prime Minister Justin Trudeau on Oct. 30, 2016, and signed under the Stephen Harper government in 2014. In 2016, shortly after the ratification, SpaceQ wrote about concerns it was hearing from industry sources saying they were concerned the deal was more favorable to the EU than Canada.
In 2016, industry raised concerns that EU suppliers can access Canadian civil space goods and services in some areas (explained just below), but equivalent access was not available for Canadians. In 2016, there were 28 nations in the EU – one of the most powerful space suppliers in the world; today there are 27 in the wake of Brexit and the departure of the United Kingdom.
In 2016, a Global Affairs Canada representative told SpaceRef Canada that “Canadian suppliers can bid on contracts put out by EU Member State space entities that are covered under the CETA Government Procurement Chapter,” but the space agencies for Germany, France and Italy were not listed under the market access schedule (Annex 19-2) at that time – to name a few examples. Meanwhile, Canadian space contracts were available to the EU under Annex 19-1 with regard to satellite communications, Earth observation and global navigation satellite systems.
Global Affairs added in 2016 that those EU space agencies that report to a higher entity are indeed eligible under CETA; for example, France’s space agency (CNES) is under “the joint auspices of the Ministry of Higher Education (in charge of space affairs) and the Ministry of Defense” according to the French embassy in Washington in 2016. (Equivalent information from 2022 is available online at the French embassy’s website.)
The spokesperson from Global Affairs added that Canada did not ask for reciprocity “due to the unique way in which the EU space sector is structured and operates” and added that the European Space Agency (ESA) is not covered by CETA due to ESA’s nature as an international organization. Additionally, ESA’s defence procurement – a significant proportion of its space funding, according to Global Affairs – did not qualify under CETA protocols.
Industry communications and consultation
A 2015 report from the CSA Audit and Evaluation Directorate written in the wake of the anticipated CETA agreement, noted the space agency’s willingness to communicate with industry about the changes. The CSA, the report said at the time, “should communicate the implications of the Canada-EU Free Trade Agreement to the Canadian space industry and encourage the industry to prepare in order to be better able to compete with European firms.”
But despite this communication and the transition period, access to CNES and other space agencies like it didn’t appear to be available during discussions at the Canadian Space Summit of 2019. We heard from industry during a consultation with stakeholders at Global Affairs and CSA that represented the first opportunity for industry to give public feedback.
SpaceQ attended openly – as several people recognized our reporter on site, and our intent to report the story – under Chatham House Rules, meaning we did not identify any participants in the conference in our 2019 story.
Numerous concerns were raised in discussions. As we wrote at the time: “There’s an unwritten rule in the European Union with respect to national space agencies and procurement. And it’s one that Canadian industry says makes it’s unlikely a Canadian company will win a contract with individual EU member national space agencies like CNES, DLR [German space agency] etc.
“The unwritten rule is simple, procurement issued by national space agencies is protected. According to one prominent industry person at the consultation, 98 percent of national space agency contracts go to companies within the nation that issued the tender. This effectively means that it’s not worth the expense of Canadian company to submit a proposal.”
Post-CETA
Canada remains eligible post-CETA to access ESA optional programs as a cooperating member, as long as Canadian suppliers contribute to the program budgets. “ESA operates on the principle that the proportion of contracts under a particular programme awarded to companies from Canada is in proportion to the funding that Canada has contributed to the programme,” a CSA spokesperson told SpaceQ in 2016.
You can read more funding details about CETA and the cooperating member program in our 2016 story, bearing in mind some of the cited figures are from more than 10 years ago. The cooperative agreement was renewed in 2019 and is in force until Jan. 1, 2030.
Last week, CSA tweeted that it had participated in the EU Ministerial Council meeting Nov. 22 and Nov. 23 “to have access to opportunities in the European market.” The tweet linked back to the CSA page about the program here, which in turn points to the ESA Industry Portal with possibilities for program opportunities.
Lessons learned for future agreements
As for lessons learned from CETA and the UK trade agreement, in its 2022 consultation CSA has published several main themes it learned from speaking with industry. Below is a short summary of what industry said:
- Space procurement is a matter of strategic national interest, especially given its focus on innovation and alignments with CSA and Innovation, Science and Economic Development Canada (ISED) mandates;
- Canadian organizations rely on government procurement due to the “relatively small government space budget in Canada”, which for the Canadian Space Agency is expected to be $388.3 million for the 2022-23 fiscal year (3.9% less in planned spending than the year before.) Note that the defence market was not considered in this discussion as again, defence was not covered by CETA. But for comparison, a medium-class space mission by ESA – like the recently approved EnVision mission to Venus – is capped at roughly $700 million (500 million euros) and the overall ESA budget for 2022 is $10 billion (7.15 billion euros). The EU has access to a magnitude of difference in taxpayers compared with Canada, however; the EU population is nearly 450 million people, compared with Canada’s nearly 40 million people.
- Europe is “a key market for space exports”, and industry recommended direct mission collaboration through venues such as Canada’s cooperative membership with ESA.
- European space companies receive substantial support – or have a direct relationship – with national governments and as a result, Canadian industry “questioned whether there is truly a leveled playing field with Europe” with regard to the trade agreements.
- CETA’s government procurement chapter did not make it clear which European space agencies were covered under the agreement, and “in their experience, there is no evidence of increased opportunities through the EU space program, EU member state space procurement or the UK under these trade agreements.”
- Benefits were cited in commercial relationships and tariffs, but industry called for “alternative industrial policy options” and “enhanced communication regarding trade agreement application.”