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Canada and Israel revise free trade agreement - analysis

Phil

Sept. 21, 2019

Overshadowing the passing of the modernized agreement, an ongoing dispute about the labelling of two Israeli wines has continued to dominate the headlines in Canada.
The coming into force of the modernized Canada-Israel Free Trade Agreement (CIFTA) on September 1, 2019 provided both Canada and Israel with further opportunities to expand their economic partnership. The culmination of over nine years of meetings and negotiations, which were committed to by Canada’s then Prime Minister Stephen Harper and Israeli Prime Minister Benjamin Netanyahu, CIFTA aims to reduce technical barriers to trade, more quickly resolve market access irritants and create new opportunities for Canadian agriculture, agri-food, and fish and seafood companies in the Israeli market. While Canada-Israel trade has tripled to $1.8 billion in the last ten years, it remains to be seen how these numbers can be improved.
There are some fundamental challenges that exist that have to be overcome for the two countries to substantially increase these numbers. On the Canadian side, Canada’s exports to the US in 2018 were $337 billion or 177 times that exported to Israel. Canadian firms, unlike their Israeli counterparts, focus first on the domestic market, then the US market and then overseas. When was the last time someone needed a Canada Goose coat in Israel?
Israeli firms, if they are to grow to any substantial size must first think globally rather than domestically and that usually entails opening up a US office. Rarely does Canada come into the picture but this has just started to change with the growth of Canada’s high tech sector. In 2017, the World Economic Forum voted Montreal, Vancouver and Toronto as three of the top 25 high tech cities of the world. Recently a number of Israeli high tech companies have listed their shares on the Toronto Venture Exchange, reflecting the change in how Israeli entrepreneurs and high tech companies view the Canadian capital markets and the growing importance of Canada’s innovation ecosystem.
Overshadowing the passing of the modernized CIFTA, an ongoing dispute about the labelling of two Israeli wines has continued to dominate the headlines in Canada. The country of origin labelling of Psagot and Shiloh lies at the centre of this aromatic dispute which was heard recently by the Federal Court of Canada (FCC). The FCC ruled on July 29 that labelling wines produced in the West Bank (Judea and Samaria) as “Product of Israel” is “false, misleading and deceptive”. How the wines should be labelled (“Produced in the Biblical Land of Israel by citizens of the State of Israel in territories legally under sole Israeli control under the Oslo II Agreement” perhaps) was not included in the judgement of the FCC.
It is interesting to note that the Canadian government argued against the judicial review application brought by a BDS activist who sought to overrule the government’s earlier decision to allow the wines to remain on the shelves of Liquor Control Board of Ontario (LCBO). Those of us who appreciate good kosher wine have had to stock up on Psagot and Shiloh wines, which remain out of stock and unavailable in Ontario since the LCBO will not order any further shipments until this case has been determinatively adjudicated or the wineries change the labels on the wine, which they have steadfastly refused to do.
The Canadian government on September 7 decided to appeal the FCC decision, which was welcomed by pro-Israel groups across Canada. The appeal will be heard by the Federal Court of Appeal, which can override the FCC decision. It appears that while both Canada and Israel at the governmental level find much common ground and would like to broaden and strengthen their economic ties, ultimately the Courts will have the final word on whether Canadians can continue to enjoy the best fruit of the vine Israel has to offer.
The author is a Toronto based Partner, and Global Chair, Retail Sector of DLA Piper Canada.
Published by Globes, Israel business news - en.globes.co.il - on September 19, 2019
© Copyright of Globes Publisher Itonut (1983) Ltd. 2019
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