Ottawa Business Journal, Canada
Trading places: Quebec leads charge for Canada-EU free trade agreement
By Jeff Esau, Ottawa Business Journal Staff
9 April 2007
With a slim victory in the recent provincial election under his belt, Quebec Premier Jean Charest hopes to herd the feds and other provinces towards a free-trade agreement (FTA) with the 27-member European Union.
While his proposal for a Canada-EU FTA hardly emerged as a burning election issue, Mr. Charest’s pre-election manoeuvring abroad in January clearly conveyed his belief that a deal would be good for the Quebec economy.
Mr. Charest’s international policy advisor Mario Lavoie confirmed last week the premier still plans to get the proposal in front of key European leaders during the Canada-EU summit on June 4 in Heiligendamm, Germany-immediately preceding the G8 Summit on June 6.
"It is our intention to aim for that date," Lavoie told the OBJ. "The premier will talk to the prime minister about it," adding that the summit "is where the idea should be launched."
In January, Mr. Charest met with Germany’s minister of the economy, Michael Glos, and to the European commissioner for trade, Peter Mandelson, at the World Economic Forum in Davos, Switzerland to pitch his plan. Charest also told reporters that Prime Minister Stephen Harper was "very enthusiastic" about a Canada-EU trade deal, and predicted Canada would see $2.4 billion in benefits once it was in place.
If Mr. Charest is successful-and EU heavy hitters like Germany and France appear to be seriously interested-professional and manufacturing firms could start to see a jump in their bottom lines.
Accompanying Mr. Charest was Quebec’s minister of economic affairs, Raymond Bachand, who handles the FTA file. He said reaction to the FTA proposal was positive, not only from politicians but from the more than 20 CEOs he met with individually behind the scenes.
Mr. Bachand said this "21st-century" FTA proposal-which encompasses many non-trade issues such as the mobility of workers, the recognition of their professional qualifications and an increase in scientific and technical cooperation-would trigger an influx of investment and expertise to Canada. This would give Canada a stronger voice in trade negotiations with China, India and other Asian markets, he said, and solve Canada’s problems with an ageing population and shrinking workforce.
Mr. Bachand said Quebec is leading the effort because of its strong ties to Europe and because "many of the sectors we are speaking about are within provincial jurisdiction, but of course at the end of the day it will be a Canadian initiative."
A key supporter of a Canada-EU FTA is the Canada Europe Roundtable for Business (CERT), an association of Canadian and European companies founded in 1999 who work to strengthen bilateral commercial ties and enhance cooperation between the business communities and the governments of Canada and the EU. Alcan, Bombardier, Forest
Products Association of Canada, European Aeronautic Defence & Space Co. are among its founding members.
According to figures CERT released in November, a Canada-EU FTA is the next logical economic step for the trading partners. Since 1995, inward Foreign Direct Investment (FDI) from the EU to Canada tripled to over $105 billion, and Canadian FDI in the EU grew even faster, from $34 billion in 1995 to $110 billion last year.
According to a statement by CERT Chairman and former Canadian trade minister Roy MacLaren, "economic relations with Europe have not been recognized as a priority."
"Clearly, the trade and investment numbers indicate that the EU should be recognized as a priority economic partner for Canada and that a greater effort must be made by both governments to maximize the potential gains in the relationship," Mr. MacLaren said.
CERT Executive Director Jason Langrish even suggests that a Canada-EU deal would "give (Canada) leverage in dealing with the U.S. because they know we are so reliant on them."
David Long, professor of international affairs at the Norman Paterson School of International Affairs and an associate of the Centre for European Studies at Carleton University, is cautiously optimistic about profitability and prospect of a deal. He says Canada has historically been keen on an FTA, but the EU has been leery. "It has not been a serious priority for the Europeans, who have wanted to see the business case to justify what would inevitably be long, drawn out and controversial negotiations," Mr. Long says.
"The stalling—some say collapse—of the Doha Round World Trade Organization negotiations has changed the context somewhat and now for the time being the Europeans seem interested," he says, warning, however, that time is of the essence. "This window of opportunity may not last long."
Frederic Merand, assistant professor of political science at the Universite de Montreal, says Quebec’s leadership in the efforts to establish a Canada-EU FTA is not surprising. "Quebec has always been one of the strongest proponents of free trade in Canada," he said. The Canada-EU FTA was "put on the ice" a few years ago for fear it would undermine the WTO Doha Round.
But not everybody thinks a Canada-EU FTA is a good idea. Indeed, Michael Hart, professor and Simon Reisman chair in trade policy at the Norman Paterson School of International Affairs, has called the prospect of a deal "an awful idea." In a 2002 paper co-authored by Mr. Hart, he said Canada would have to modify its "commercial law and practices whenever they conflicted with European custom." Mr. Hart says he has "seen nothing (since 2002) to change (his) mind," and still believes Canada should focus on its trade relations with the U.S., which accounts for 85 percent of our trade.
Prime Minister Harper may have seemed enthusiastic on Mr. Charest’s FTA proposal, but the Department of Foreign Affairs and International Trade sounds cautious. Spokesperson Anne-Marie Parent said, "Should WTO talks not bear fruit, we would want to revisit with the EU how to achieve our trade interests."
A bold idea with immeasurable benefits to Canada. Canada has to act fast as free-trade negotiations have just begun with South Korea and free trade with the EU has just received a very warm welcome with the Bush Administration. Canada needs easy access to more markets. We know how important with US economy is with 300 million people; Europe has over 500 million people.
We are too reliant on the US; with 85% of our exports going to the US, we have placed too many of our eggs in one basket. The American economy is cyclical (like any economy) and having access to European markets would help Canada ride out the troughs in the American economic cycle, instead of holding our breathes and praying for the best everytime there is worry of recession in the US. The growing economies of Eastern Europe and the natural resource starved economies of Western Europe are hungry for many of the natural products that Canada can supply. They also want many of the luxury products that we export, which will help us diversify away from natural resouces to the highly skilled sectors of our economy. Canada is blessed by many things and geography is only one. Canada sharing the longest unprotected border in the world with the biggest economy would make Canada the perfect logistics and manufacturing hub for North America. Reducing the bureaucratic hurdles regarding the setting-up of operations on the Canadian side of the border would inspire many European firms to relocate from the US to Canada. Canada is still a small economy (in the trillion dollar class but it does not have that much punch globally) with limited access to capital for firms and entrepreneurs. Allowing the free flow of not only goods and services but capital as well would only be a blessing to Canadian firms big and small. A more efficient matching of consumers and suppliers, and, firms and capital are only the tip of the iceberg.
In terms of our trade relationship with the US, 1) we would have other places for our goods and services would improve our bargaining position with the US on future trade negotiations, 2) we would not be as vulnerable to protectionist winds and 3) have more power in WTO complaints against the US. The only way to get a better deal from the US and to better stand-up for ouselves is to improve our economic situation. A free-trade agreement with the EU would help a lot.
If the free movement of labour is also covered in the agreement, Canada can 1) boost its population spurring the economy to increase construction of housing and services, 2) boost the skills, perspective and background of its population creating a more competitive workforce, 3) increase competition in among both of our workforces, 4) allow Canadians to gain experience and education in Europe, 5) decrease the immoral and traumatic barriers for bi-national families and friends from both Canada and the EU, 6) allow firms to hire and place personnel from a larger pool of workers from both economies creating a more efficient economy, 7) a better use of the Canadian workforce’s skills by increased recognition of foreign qualifications, no more foreign doctors waiting tables or driving taxis and 8) simply allow people from both societies to live where they prefer making both societies happier and more productive.
We will inevitably have to alter bits of our commercial law and practices, but where do you think we inherited that commercial law from in the first place. Canada and Europe are similar societies with advanced protections for consumers, workers and firms, we both use the metric system and both peak English and French, the bureaucratic and legal points that we conflict will be minor and resolvable. Afterall, negotiations are for working out these points of conflict.
Admittedly agriculture will be the the largest point of contention with the EU. The EU and Canada are both unlikely to eliminate subsidies for farmers, despite the economic, moral and political agruments for there abolition. I am sure something can be worked out on this sole point of serious contention, or worst case scenerio, exclude agriculture from any agreement. New Zealand is the only country that I am aware of that has eliminated agricultural subsidies; we should follow thier example. Something for another day or another round of the Doha trade talks.
Canada has just signed an open skies agreement with the UK. The effects of this have been already big with a huge increase in routes and jobs and falling fares for consumers. Halifax just got its first direct flight to Belfast and Hamilton just got connections to cities all over the UK including Exeter and Doncaster, among the more obscure. Think of the boost to the Canadian tourist industry, the falling airfares from Canada to the UK and the jobs created by expanding airlines. The UK only has 60 million people, there are 460 million more people in the EU that a wider open skies agreement could connect to Canada. The EU has just signed an open skies agreement with the US. The level of excitement, investment and expansion that this has caused is already massive. If only Canada was first to sign an open skies agreement we would have a first mover advantage over the US and would have attracted a lot of investment before airlines become preoccupied with the larger market in the US. Canada can now only follow the US into a bold and visionary open skies agreement.
The benefits are simply too huge to ignore this opportunity or let agriculture get in the way of a free trade agreement. It is time for Canada to become the master of its own fate. Canada’s future depends on it.
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