Space Provisions of Canada – European Union Trade Agreement (CETA) Ineffective

Credit: European Commission.

Issues raised several years ago were again the focus during a consultation with stakeholders by Global Affairs Canada (GAC) and the Canadian Space Agency.

At last weeks Canadian Space Summit, stakeholders got their first chance as a group to provide feedback to GAC on the Comprehensive Economic and Trade Agreement (CETA). As you might expect when something isn’t going the way stakeholders would hope, they complained, sometimes quite passionately.

After several years of negotiations CETA was signed by Canada and the European Union (EU) on October 30, 2016. The full trade agreement has not been fully implemented as issues on several fronts in Europe are being worked out. However, portions of the CETA agreement were provisionally put into effect on September 21, 2017, including the provisions related to space industry.

What’s in it for European Union

To understand what the benefits of CETA are to the European Union with respect to space industry, you need to understand what government entities are part of the agreement. That information is listed in Annex 19-A – Market access schedule of Canada.

For space, the only entity that matters is the Canadian Space Agency. While the Department of National Defence is listed, defence procurement related to space industry is effectively off limits.

Within Annex 19-A there is a note attached to Annex 19-1 that was specifically crafted for the Canadian Space Agency and what space segments would be open to European companies.

Specifically it states “for the Canadian Space Agency (CSA), the procurement of covered goods and services is limited to those related to satellite communications, earth observation and global navigation satellite systems.”

From the European perspective what’s in the deal for them is clearly outlined.

What’s in it for Canada

From the Canadian perspective what’s in the deal for them is not as clear.

When it comes to space procurement, Canada can access three European entities; the European Space Agency (ESA), the European Commission and the EU.

CETA applies to the EU and EC.

Canada, as an associate member of ESA can participate in some programs. However, it’s effectively a “pay-to-play” model where Canada through the CSA pays an annual fee to ESA, and in return Canadian organizations can apply for contracts on certain ESA programs. From a purely economic perspective, Canada is subsidizing industry participation in ESA.

As for the European Commission, their programs are run by ESA, meaning Canada’s participation is effectively the same as it is for ESA.

What has Canada’s participation in ESA meant to Canadian industry? According to the CSA between 2013 – 2018 “ESA signed a total of 168 contracts with the Canadian space sector, valued at a total of €75.8 million, representing approximately $115 million, or $23 million annually on average.” That would almost directly be proportional to Canada’s investment in “optional programmes” with ESA over that time which was $110 million.

Which brings us to CETA. This is where it gets interesting.

Annex 19-B is the market access schedule of the European Union. Within this annex is Annex 19-1 – Central government entities. This is the key list of European entities available to Canada.

As you go through the list, and knowing that ESA is not covered by CETA, you are left with looking for national space agencies for each EU member. Unfortunately for Canada nearly all of the national agencies such as CNES for France, DLR for Germany, the UK Space Agency etc are not listed. This would suggest that Canada is shut-out of of competing for contracts from these agencies.

Not so fast says GAC. Even though, as an example, CNES, the French space agency isn’t listed as en entity in the France section, if it reports to a higher department that is listed, then it’s available. This is the case with CNES. The space agency 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.

Great, now Canadian industry can bid on CNES contracts. Well, maybe not.

Facts on the ground

While GAC officials insisted that CETA was meant to benefit Canadian businesses, the reality is that EU member national space agencies are for the most part closed to Canada.

That’s the facts on the ground. And something GAC seemingly wasn’t quite aware of, even though it’s an issue that’s been there since the beginning.

EU protected markets

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 etc.

The unwritten rule is simple, procurement issued by national space agencies is protected. According to one prominent industry person at the consultation, 98% 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.

So while Canada has opened up part of its domestic space program to the Europeans through CETA, reciprocal access doesn’t stand up to the facts on the ground.

Canadian protected markets

It wasn’t just Canadian industry that complained about EU protected markets. At one point during the consultation a representative for a company with EU and Canadian interests made the point that Canada was labelling some proposals as R&D which effectively shut-out EU companies from bidding on the tender.

What’s next

GAC, with the help of the CSA, is going to continue consultations with industry. The ongoing consultation will provide GAC the feedback it needs to try and fix the agreement or opt-out.

The agreement, with respect to the CSA and what’s open to the EU, is a temporary five year commitment. Canada can opt-out of the agreement within the first five years. If it doesn’t the “commitment will become permanent.”

An ineffective agreement

At the end of the day, in looking at what’s transpired to date, it seems clear that CETA is an ineffective agreement with respect to the space industry, be it Canadian or European.

In listening to the participants at the consultation there’s only been one contract awarded to a European originating entity though Canada’s tender system. That award did go to a Canadian company, though itself the creation of a European company. As for Canadian companies, zero.

While GAC hopes to work with the Europeans to solve issues brought up by Canadian industry, it seems unlikely that the Europeans will open their national space agency markets. If there’s no net benefit to Canada, then GAC will have to inform the EU at some point before the five year temporary term expires that it’s opting out of the CSA annex of CETA.

When it comes opening national space industry markets, national strategic interests trump free trade.

Note: At the time of the event, SpaceQ was not aware of any restrictions as to whether media were permitted to attend. The event schedule said “OPEN TO ALL CANADIAN INDUSTRY – No Summit Badge Required.” Although several people recognized me, no one told me I could not attend. In reporting this story, SpaceQ decided to follow Chatham House Rules and not identify anyone in the story. Based on what I heard, it is my belief, and this publications, that making the general public aware of this ongoing story is important.

About Marc Boucher

Marc Boucher
Boucher is an entrepreneur, writer, editor & publisher. He is the founder of SpaceQ Media Inc. and CEO and co-founder of SpaceRef Interactice Inc. Boucher has 20 years working in various roles in the space industry and a total of 27 years as a technology entrepreneur including creating Maple Square, Canada's first internet directory and search engine.