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EU wants provinces on board before talks start

Embassy, May 21st, 2008

EU Wants Provinces On Board Before Talks Start

While Canadian officials were praising the benefits and importance of an agreement last week, European diplomats were still listing barriers to even starting talks.

By Michelle Collins

After years of exploring the feasibility of a free trade agreement with the European Union, Canadian politicians and officials are now turning their attention to the next Canada-EU summit, in Montreal in October, as the venue for finally launching official talks.

But despite strong support for the relationship from Canadian policy makers and business associations at a conference last week, European diplomats and officials warn there are significant obstacles that must be addressed if October’s summit is to mark the start of negotiations.

While past talks between the two sides have been plagued by bureaucratic
hurdles, a momentum from within Canadian ranks for a possible free trade deal has garnered a fair amount of attention lately, including the presence of several high-level policy makers at a Public Policy Forum conference on the subject last Thursday.

International Trade Minister David Emerson delivered the morning address, using the opportunity to note that two-way trade between Canada and the EU has reached $110 billion, and Canada is the fourth largest foreign direct investor in the EU, accounting for $122.5 billion on the other side of the Atlantic in 2007. Last year, imports from the EU reached $42.5-billion, and Canada ranks as one of the top-10 destinations for EU exports

Mr. Emerson recently told reporters that he hopes the Montreal summit will break the current "log-jam" that has plagued past trade deal talks between the two countries.

The trade minister came out strong in support of pursuing an agreement with the EU on Thursday, of beating the Americans to it, and ensuring Canada has access to markets other than that which lies south of the border.

In striking a deal with the EU, Canada stands to gain access to a huge and diverse market that is technologically sophisticated, with stable democratic governments who have responsible labour and environmental policies, he said.

"For Canada to get to the head of the line, for us to get our share of energy and resources to negotiate an agreement, we’re going to have to be strong advocates, we are going to have to show the benefits to the Europeans, and we’re going to have to move boldly and quickly," Mr. Emerson said.

Europe also has much to gain, he said, as Canada is a stable supplier of energy to the world, with an emerging resource base in the north. He said that’s one powerful reason why the EU should want to deepen its relationship with Canada.

While he acknowledged the difficulties encountered in the negotiations two years ago on the Trade and Investment Enhancement Agreement (TIEA), particularly at the provincial level, Mr. Emerson said the finalization of a free trade agreement with the European Free Trade Association in January demonstrates that Canada is in a position to negotiate.

Also laying out the red carpet for a trade deal with the European bloc at last week’s conference was Quebec Premier Jean Charest, who has taken on a leadership role in selling the other provinces and territories on the benefits of an agreement, and appears to be pegging his own personal legacy on the ambitious goal of partnering Canada and the EU.

"Our sales pitch to our European friends is to say to them that if you believe that we need to intensify our transatlantic accord, the best way to do this is to enter into an agreement with Canada and to sign an agreement that will be an agreement of a new generation so to speak, that goes further than anything else we have done in the past," Mr. Charest said.

"This isn’t just about trades and goods and services, it is also about going further and creating an environment where we can encourage more foreign investment coming from Europe," Mr. Charest said.

Actions Speak Louder

But while Canadian politicians and business representatives spoke enthusiastically of the economic opportunities to such an agreement, European officials cautiously pointed out that there remain significant barriers to launching, let alone completing, negotiations. To overcome them, it seems, will require more than grand talk of what could be reaped from the agreement, and warrants a closer look at the immediate demands from the EU.

At the root of the problem is Canada’s "capacity to deliver," said Marc Vanheukelen, a director at the European Commission, with the paramount concern for the EU ensuring an absolute commitment from the provinces and territories.

"What we definitely want to know for sure is that whatever agreement is made, the provinces are on board, that there is a legal obligation. Politics is not enough," Mr. Vanheukelen said.

He also warned that any agreement must not impair the prospects of a successful conclusion to World Trade Organization talks, and that he expects many of the same obstacles from the past to remain problems going forward.

Reaffirming this, EU Ambassador to Canada Dorian Prince said that the role of the provinces will be crucial because, if Canada, already a medium-sized market, remains fragmented into these smaller markets, it will lose its appeal for Europe.

Canadian Ambassador to the EU Ross Hornby emphasized that regulatory co-operation on labelling, certification and investing is a key area Canada will want to negotiate on. He also pointed out that as Canada stands to see huge investments in its infrastructure over the next decade, access to Canadian government procurement contracts remains a significant goal for the European Union, but that he would warn "not to seek procurement for procurement."

While a recent study by the Centre for European Policy Studies concluded that the few remaining tariffs are on agricultural products, the report also states that it is unlikely these will be removed.

For the Europeans, concern over agricultural products runs deep. Spanish Ambassador Alonso-Burón y Aberasturi said the importance of agricultural products and foodstuffs in the EU is a major problem to advancing relations, and added "the devil’s in the details."

As head of economic and commercial affairs at the Embassy of Greece, Konstantinos Dikaros said there remains much to clarify in terms of Canada recognizing the certificate of foreign EU products. For example, Greek Feta cheese is the only such product recognized under that name, and no other country is supposed to use the name for its own products, a distinction the country will demand in Canada as well.

While in support of taking a general approach to talks with Canada, Mr. Dikaros emphasized that the EU is more reluctant than Canada to pursue a free trade agreement before the conclusion of the Doha round of negotiations at the WTO.

"Canada is more clear-cut about proceeding with talks, and we have to see how the results of the joint study, how this is going to play out at the summit in Montreal," he said.

Other issues impeding a clear path to negotiations are labour mobility and credentials recognition, and disputes over airline agreements. At the state level across the EU, there is the complex matter of protecting intellectual property, and for Canada, the difficulty of harmonizing regulations with the EU.

In this area, the study found that when it comes to regulations, Canadian companies could suffer from the strengthening environmental policies in the EU.

Forest products in particular were singled out as incompatible with the EU’s Green Public Procurement Policies (GPP) because this allows EU countries to rate a foreign country’s manufacturing processes and grants them the right to "discriminate against products that they feel may pose a problem to human, plant or animal health."

Additionally, the EU’s REACH directive to regulate chemicals used in production will impact Canada’s natural resources exports because the volume of the impurities found in extracted iron ore, zinc and nickel are above the one-tonne limit.

And while French Ambassador Daniel Jouanneau said President Nicolas Sarkozy, who will take the presidency of the EU in July, has a fond admiration for Canada, he acknowledged that not all 27 EU members are as engaged.

"Europe is 27 countries, you have to convince all 27 countries," he said. "Don’t neglect a single country, and don’t forget the European Parliament."

 source: Embassy Magazine