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Provinces hold key to next stage of EU-Canada trade talks

Montreal Gazette, Canada

Provinces hold key to next stage of EU-Canada trade talks

By Andrew Mayeda, Postmedia News

15 December 2010

OTTAWA — Free-trade talks between Canada and the European Union will enter a crucial phase early next year, when the provinces will be asked to clarify where they stand on opening their procurement contracts to foreign bidders — a potential dealbreaker for the Europeans.

After meeting Wednesday to take stock of progress on a free-trade agreement, Federal Trade Minister Peter Van Loan and European Union Trade Commissioner Karel De Gucht said the two sides will push ahead with the negotiations, with the sixth round of talks to take place next month in Brussels.

Van Loan said he was "surprised and encouraged" by the pace of the talks, which the Conservatives still believe can be completed by the end of next year. "Negotiations have been moving at a good pace, ahead of expectations," he said in an interview.

A key test will come in the new year, when it becomes clearer how much access the provinces and territories are willing to provide to lucrative government contracts. Van Loan said the provinces will be expected to put specific offers on procurement access on the table sometime in the first quarter of 2011.

In a nod to the provinces’ influence in clinching a deal, provincial representatives actually have been given a seat at the table in the negotiations. But that has also left the federal government with the delicate task of brokering some kind of consensus among provinces with very different interests.

"It’s very important that we do that in an ambitious way — and in a balanced way, so that you don’t have one part of the country carrying the weight for other parts of the country that are less willing to be ambitious," Van Loan said. "It remains to be seen what will come to pass on that front, but we’re working with the provinces toward that kind of an outcome."

One veteran trade expert said provincial governments will be reluctant to give up much on the procurement front, given they have little to gain politically.

"If you’re a provincial politician, you’re going to give up the pork barrel that provincial procurement represents. What are they gaining by giving up that pork barrel? They’ll have a hard time figuring out what that is," said Michael Hart, a former Canadian trade official and now a professor of international affairs at Carleton University.

For the Europeans, the procurement issue is the closest thing to a dealbreaker. European officials were miffed by the Quebec government’s decision in October to lock international bidders out of a $1.2-billion contract to supply subway cars in Montreal.

Quebec Premier Jean Charest, who has been an enthusiastic supporter of a trade deal with the EU, announced the contract would go to a consortium led by Montreal-based aerospace firm Bombardier, without allowing foreign firms to bid. The Charest government has introduced legislation to fend off legal challenges under global trade law.

"As we now enter the final, crucial stages, it’s vital for both sides to double up their efforts to reach our common goal," De Gucht told reporters after meeting with Van Loan in Ottawa.

Next to Canada’s trade relationship with the United States, clinching a trade agreement with the European Union — the biggest economic bloc on the planet — is the Harper government’s biggest priority on the trade front, Van Loan has said.

Officials estimate a deal would increase Canada’s GDP by $12 billion — or 0.77 per cent — by 2014.

By comparison, the EU is expected to add roughly $17 billion to its GDP through a deal, which represents only 0.08 per cent of the much larger European economy.