Canada and EU trade proposal

[Hipster Duck]

Canada-EU trade proposal rivals scope of NAFTA
Plan to lift barriers for goods and labour to be discussed at summit after election

DOUG SAUNDERS

From Thursday's Globe and Mail


September 18, 2008 at 2:00 AM EDT

LONDON — Canadian and European officials say they plan to begin negotiating a massive agreement to integrate Canada's economy with the 27 nations of the European Union, with preliminary talks to be launched at an Oct. 17 summit in Montreal three days after the federal election.

Trade Minister Michael Fortier and his staff have been engaged for the past two months with EU Trade Commissioner Peter Mandelson and the representatives of European governments in an effort to begin what a senior EU official involved in the talks described in an interview yesterday as “deep economic integration negotiations.â€

If successful, Canada would be the first developed nation to have open trade relations with the EU, which has completely open borders between its members but imposes steep trade and investment barriers on outsiders.

The proposed pact would far exceed the scope of older agreements such as NAFTA by encompassing not only unrestricted trade in goods, services and investment and the removal of tariffs, but also the free movement of skilled people and an open market in government services and procurement – which would require that Canadian governments allow European companies to bid as equals on government contracts for both goods and services and end the favouring of local or national providers of public-sector services.

Previous efforts to reach a trade pact with Europe have failed, most recently in 2005 with the collapse of the proposed Trade and Investment Enhancement Agreement.

But with the breakdown of World Trade Organization talks in July, European officials have become much more interested in opening a bilateral trade and economic integration deal with North America.

A pact with the United States would be politically impossible in Europe, senior European Commission officials said.

A newly completed study of the proposed deal, which European officials said Prime Minister Stephen Harper decided not to release until after the election, concludes that the pact would increase bilateral trade and investment by at least $40-billion a year, mainly in trade in services.

Ottawa officials say they have overcome what they see as their biggest hurdle: the resistance of provincial governments to an agreement that would force them to allow European corporations to provide their government services, if their bids are the lowest.

Although Ottawa's current list of foreign-policy priorities does not include European issues, European and Canadian officials say Mr. Harper has been heavily engaged with the proposed trade pact.

The two governments have completed a detailed study of the proposed agreement that will be unveiled shortly after the election, should the Conservatives win.

Both Ottawa and Brussels have had staff work on a draft text for a deal they had hoped would be introduced at a Canada-EU summit, to be attended by French President Nicolas Sarkozy, European Commission President Jose Manuel Barroso and Mr. Harper in Montreal on Oct. 17. France currently holds the rotating presidency of the EU, and Mr. Sarkozy has said that he hopes to make economic integration with Canada one of his accomplishments.

Last Wednesday, a top Ottawa trade official wrote to Mr. Mandelson to propose “the launch of comprehensive negotiations toward a closer economic partnership at the Canada-EU Leaders Summit, to be held on October 17,†and stressed that all 13 provincial and territorial governments had agreed to the proposed pact at a July 18 meeting in Quebec City.

Because of the election, Mr. Harper appears to have decided not to unveil a full text of the proposed agreement, but instead to use the summit to inaugurate the trade talks with the launch of a “scoping exercise†that will quickly set the goals of the pact and lead to formal “comprehensive trade and investment negotiations†to begin in “early 2009,†according to communications between senior Canadian and European officials examined by The Globe and Mail.

Proponents, including all of Canada's major business-lobby organizations, are in favour of the deal because it would open Canadian exporters to a market of 500 million people and allow the world's largest pool of investment capital into Canadian companies without restrictions.

Because Canada's fractious provinces have killed attempts at a trade pact in the past, Europe is demanding that Canada accept a more far-reaching agreement than Canada and Europe had attempted before, in an effort to win a stronger commitment, EU officials said.

Major “deal-breaker†conditions, officials said, include full agreement by all 10 provinces, especially on the issue of European companies providing government services, and what are known as “geographic indicators,†which forbid products such as champagne and feta cheese to be produced under those names outside their nations of origin. Controversially for Canada, this may soon be extended so only English producers can use the name cheddar on their cheese.

However, both sides agree that there is far more political will to negotiate a major deal, on both sides than there ever has been.

“I am far more optimistic this time than I've ever been in the past. … I feel very confident that we will be able to launch something on Oct. 17 that will give us a better chance than we've ever had before to get a full deal in place,†said Roy MacLaren, head of the Canada-Europe Round Table, a pro-trade business organization that has been heavily involved in the negotiations.

As a trade minister in the Jean Chrétien government and later as a diplomat, Mr. MacLaren was involved in several previous attempts at a Canada-EU pact.

 

[afransen]

Sounds very positive!

It would also make Canada an appealing location for businesses wanting to straddle the US and EU markets.

 

[kEiThZ]

Sounds very positive!

It would also make Canada an appealing location for businesses wanting to straddle the US and EU markets.

+1

That's the first thing I thought of too. Canada could become a bridge between the EU and the NAFTA block.

 

[Ronald]

I'm hoping this proposal will pass.
Besides the benefits already stated here, I'm particularly excited about the free movement of labour.
Many EU citizens will be encouraged to move to Canada by this law.
We've seen large migration waves in the recent past due to expansion of the free movement of labour zone. When eastern EU countries such as Poland joined the EU, a large portion of their labourers left for western Europe-- with the UK and Ireland being their favorite destinations. If Canada is to be included in this zone, expect to receive a large influx of (eastern) Europeans who would have otherwise gone to Britain. I'm also thinking a good portion of eastern Europeans that moved to Britain, Ireland etc. will move on to Canada. North America is very, very popular in the eastern parts of Europe right now, where as western Europe isn't nearly as popular. As for me, it would mean that I can legally reside in the EU, the US and Canada. That would have been beyond my wildest dreams a few years ago.

 

[kEiThZ]

I doubt we'll see free movement of labour, and particularly for anything less than professionals. We are not going to end up becoming a de facto EU member. It's a free trade deal with the EU, that's all. It is removing trade barriers. But it'll keep up many other barriers....

 

[cacruden]

I doubt we'll see free movement of labour, and particularly for anything less than professionals. We are not going to end up becoming a de facto EU member. It's a free trade deal with the EU, that's all. It is removing trade barriers. But it'll keep up many other barriers....

Actually, I believe it will be more than NAFTA (i.e. list of professionals - who must have education matching profession - and intention of it being temporary - etc. etc. etc.), but a little less than what an EU country has. The news reports mentioned "skilled labour" mobility - which is usually fairly loosely interpreted.

My guess is that you should interpret it this way:
- educational or employment history to match the job
- labour mobility means that you have to have a job offer

But my guess is that they won't have a "professional" qualifications list.

For most people this will mean that it will be equivalent to being able to move around for work with ease. This benefits both Canada and the EU (just in different ways). With Canada - you get a wider market for your services. For EU this gives one more developed nation that can absorb the extra labour that has been migrating west (mostly to the UK) from newer eastern block countries that are in a transitional phase. It also gives the ability to have a base to support the North American market - within that timezone - with little bureaucratic interference. Remember that the driving force behind this deal is Quebec/France, and that this deal is likely what they will want to be as a template for any future negotiations with the US (huge services market).

 

[Whoaccio]

Canada-EU freetrade pact?

The bold economic move you haven’t heard of

Canada could claim to be the catalyst for the next great wave of world trade liberalization

ANDREW COYNE | October 22, 2008 |

On June 17, 1930, the United States Congress passed into law the Smoot-Hawley Tariff Act. The act imposed huge increases in tariffs on thousands of imported goods, leading to a catastrophic decline in trade—not only in the United States but, as other countries responded in kind, worldwide. What began as a nasty recession deepened into the Great Depression.

That much is well-known. Not so well-known is that Canada beat them to it. In May of that year, with an election looming, the government of Mackenzie King jacked up tariffs on goods representing almost one-third of American exports to Canada. That was just the start. That summer the Conservatives under R.B. Bennett were elected on a promise to deploy high tariffs as a kind of economic dynamite, the better to “blast” our way into foreign markets—our own Smoot-Hawley, and just about as helpful.

It is a relief, then, to see that history is not about to repeat itself. To the contrary: in the shadow of the credit crisis, the government of Canada has just announced the boldest economic stroke in a generation, one that, if it succeeds in its largest ambitions, would do more to revive the world economy than any single measure you could name.

You would think, then, that you might have heard something by now about this ambitious plan—perhaps, say, in the recent election. Yet chances are this is the first you will have read about the coming launch of talks on a Canada-Europe free trade agreement. That’s a statement about how ideas-averse our political culture has become, amongst Conservatives in particular: even as they were taking flak for running an empty, policy-free campaign, they were sitting on the biggest idea of them all—a sweeping proposal for “deep economic integration” with the world’s largest and richest market, embracing not only the free movement of goods and services, but also capital and maybe even labour.

That the opposition likewise declined to make it an issue, however, may also be a statement about how uncontroversial free trade has become in Canada. How uncontroversial is that? The Toronto Star is in favour. Twenty years ago, this country nearly had a nervous breakdown over whether to engage in a free trade agreement with the United States, with the Star leading the opposition. And today? It’s “an idea whose time may have finally come,” the paper yawns.

Such is the consensus in its favour, I probably needn’t rehearse the basic case for free trade: the lower prices and broader selection it affords consumers; the greater efficiency it forces upon producers; the economies of scale it makes possible, along with the opportunities for more efficient allocation of capital and labour across national borders. Federal government studies project Canada-EU trade would expand under such an arrangement by as much as a third, raising output by 0.8 per cent of GDP within five years. That may not sound like much, until you realize that represents, not a one-time gain, but a permanent, compounding increase in national income, year after year after year. (Why, it’s such a good idea we might even try it between the provinces.)

Oddly, the biggest skeptics about these sorts of bilateral agreements tend to be found among economists. The case for free trade, they point out, is based on the increase in trade it produces: on trade creation. But if a country lowers its trade barriers selectively, to one country or group of countries but not to others, the danger is that some or all of the trade that results will simply displace previous trade relationships. That is, it will produce, not trade creation, but trade diversion.

In practice, these fears have proved overblown. The Canada-U.S. deal did not divert much trade from other countries, for the same reason that a Canada-EU deal will not divert much trade from the U.S.: geography. And so far as either is the case, they cancel each other out. So nostalgists who see in this a revival of Trudeau-era dreams of a “Third Option” can forget about it. It’s not going to happen.

What’s more likely, and what the skeptics overlook, is the competitive dynamic such bilateral deals typically unleash—one free-trade deal leading to another, and another, in a kind of free-trade domino effect. That’s what happened with the Canada-U.S. agreement. Almost immediately Mexico applied to join, fearing that otherwise Canadian and U.S. exporters would gain a competitive edge over their Mexican rivals in each other’s markets. Something similar, one suspects, is behind the Europeans’ newfound enthusiasm for a deal with Canada, after years of rebuffing our advances: as bait to hook the Americans. After all, should Canada and the EU strike a deal on their own, Canada would steal a march on the United States as a place to invest. By locating in Canada, a firm could export tariff-free to both the U.S. and Europe: 800 million of the richest consumers on Earth.

A Canada-EU deal, then, could be the spur to a larger transatlantic deal, combining NAFTA and the EU in a single massive trade bloc. And then? Would not China and India then have to come to the table in earnest? Canada could claim with some justice to have been the catalyst for the next great wave of world trade liberalization, a timely antidote to the forces of economic contraction.

And if the dominoes don’t fall? Then we would merely have positioned ourselves at the crossroads of international trade, the only developed country with guaranteed access to the world’s two richest markets. I tell you this is big, big, big.

When I first heard of this proposal earlier last year, I put it in the part of my brain that stores things like the moon landing conspiracy and The Da Vinci Code. I thought, the hurdles in getting Quebec & Euro farmers on board would be too high. The collapse of the Doha round negotiations only underlined it in my mind. It seems to be going ahead though, and God it can't come soon enough. The cheese selection in Toronto is appalling. Any thoughts?

(p.s. I have no clue how to delete a thread I started, could the mods please delete the non-poll version of this I started earlier by mistake?)
(p.p.s. ohh god, can I somehow correct some of the grammar in the poll questions?)

 

[kEiThZ]

Is there a way to combine this poll, with the other EU thread......whoaccio's lead-off post and the poll need to be moved into that thread....

 

[JasonParis]

Done.

 

[kEiThZ]

Thanks....this facilitates discussion better.

 

[Whoaccio]

(thanks mods)

This debate is nowhere near controversial enough. Some of us are still complaining about NAFTA being the end of all things Canadian and some Reagen-Mulroney-GWB-Lucifer inspired plot to destroy Canada's economy and soul. A kind of cultural and economic imperialism which will soon blot out the "Great White North" with McDonalds, Britney Spears and Mexican migrant workers, we will no longer be "masters in our own house", to borrow from that great Quebecois expression.

But along comes the EU-Canada proposal, which is far broader in it's scope and depth, and even the Toronto Star supports it! Has the whole world gone mad?! The paper has just recently called for a "reopening" of NAFTA, but the E.U. is all fine and dandy. Is this a double standard? A kind of expression of anti-american sentiment, or have Canadians just learned to love free trade?

 

[kEiThZ]

^Because when the yanks screw us anti-americanism is warranted and when someone else screws us anti-americanism is warranted. It's the Canadian way.