Embassy, Canada

Four Trade Deals on the Horizon

By Lee Berthiaume

13 June 2007

International Trade Minister David Emerson says the successful completion of Canada’s first free trade deal in six years will signal the country’s re-emergence as a player on the global trade scene.

Now, with an agreement in place with the four-country European Free Trade Association, the government is set to begin negotiations with a host of new targets in the form of Peru, Colombia and the Dominican Republic.

But some are questioning the decision to go after a deal with Colombia given the situation in the country, while Mr. Emerson himself warned that negotiations with South Korea are at the do-or-die point.

The minister announced the completion of an agreement with Iceland, Liechtenstein, Norway and Switzerland during a speech to mark International Trade Day last Thursday.

Mr. Emerson said the agreement, which comes after nine years of negotiation, will open opportunities for Canadian businesses in the building materials, forestry, auto parts and agricultural sectors.

It will also provide a springboard for Canadian companies to enter the 27-country European Union market, and an advantage over American companies as the United States does not have a free trade agreement in Europe.

Trade between Canada and the four countries amounts to about $11 billion per year, with two-way investment topping $22 billion.

Negotiations began in 1998 but came to a standstill in 2000 over Canadian concerns that Norway’s shipbuilding industry would devastate Canada’s own fledgling sector.

Mr. Emerson said the agreement includes a three-year grace period, after which the 25 per cent tariff on foreign-built ships will be phased out over 15 years.

Peter Cairns, president of the Shipbuilding Association of Canada, said the government had done a "fairly reasonable job" of protecting the industry, but companies are now waiting to see what kind of support they will receive to ensure the industry will survive once the phase-out period ends.

The same day Mr. Emerson announced the EFTA agreement was completed, the government said it would renew and add $50 million over the next three years to the Structured Financing Facility. The SFF helps buyers of Canadian-built ships by reducing the interest on loans they use to purchase them.

But even with the SFF, and the government looking to spend around $3 billion on new coast guard and military ships, Mr. Cairns said more will be needed.

Talks with Latin America to Start Soon

Norwegian Ambassador Tor Berntin Naess said the European countries are "very, very satisfied" with the completion of the free trade agreement negotiations.

Mr. Emerson said the agreement’s most important benefit is the tone it sets.

"This agreement is a major directional statement," he told foreign diplomats, Canadian business and civil society representatives, and government officials after announcing the agreement in Gatineau.

"It’s a statement that Canada is back in the game."

When asked whether the agreement represents the death of the Doha Round of World Trade Organization negotiations, Mr. Emerson told reporters he remains "cautiously optimistic" the talks will still produce results.

The minister said negotiations with Peru, Colombia and the Dominican Republic will begin shortly, while the government is actively pushing to finish a deal with the four-country bloc of Honduras, Guatemala, El Salvador and Nicaragua.

But Mr. Emerson admitted negotiations with South Korea are entering a critical time as the country recently finished a deal with the U.S. and is now turning its sights on the European Union.

"There is no doubt about it that we getting to the final stages where we’re going to have to see some significant movement over the next few weeks," he said, "or we may get into a hiatus in terms of getting a conclusion there."

While the U.S. Congress still has to approve the deal, which may or may not happen, the minister said the Canadian government is under pressure to finish the talks, which have already dragged on for several years.

"It puts pressure on us in particular to ensure that we don’t find ourselves once again disadvantaged because our number one trading partner has cut a deal with a major country that leaves us on the outside," Mr. Emerson said. "So it’s a very important time in terms of Canada-Korea trading relations."

Peruvian Ambassador Guillermo Russo said his country, which also has a FTA with the U.S. going through Congress, is eager to get started on talks.

While Canada is the largest investor in Peru’s extensive mining industry, Mr. Russo said the Latin American country wants to see more work with Canada on the agriculture sector.

Despite the fact that Canada is generally very protective of its agricultural industries, the ambassador said he does not foresee any problems in negotiating an agreement that would cover the sector.

"I don’t feel there are many sensitive subjects," he said.

Colombia Deal Could Tarnish Canada says Human Rights Activist

But a Colombian human rights activist visiting Ottawa last week did raise concerns that given the political climate in the country, now isn’t the time to begin negotiations with his country.

The Latin American country and the U.S. signed their own free trade agreement last November. But the Democrat-controlled Congress has refused to ratify it over human rights concerns, as well as links between Colombian President Alvaro Uribe’s administration and paramilitary groups.

Ivan Cepeda, founder of the National Victims Movement of Colombia, said given the links between Mr. Uribe’s government and the paramilitary groups, the international community’s priority should be dismantling the force.

In addition, he said dealing with the Colombian government lends it legitimacy.

"There can’t be negotiations when there are these conditions," he said in an interview Friday. "The assistance Colombia needs right now is to dismantle the paramilitary structures."

Mr. Cepeda said that not only would Canadian investments be put at risk, but Canada’s reputation as a defender of human rights and good governance could be hurt.

Mr. Emerson, however, said the government is applying the same standards of human rights, democracy, rule of law and freedom that have marked its foreign policy to its dealings with Colombia.

However, he said applying those principles "is not in contradiction with engagement in trade and commerce" when it comes to Colombia.

"We believe they are moving in the right direction," he said. "They do need economic prosperity, more quality base than in past, and Canada can play a positive and constructive role to improve their evolution to a much stronger democracy."