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Details still under wraps for Canada- Europe trade deal announced in Brussels

Prime Minister Stephen Harper and European Commission President celebrate a tentative trade agreement between Canada and the EU.
Image Credit: THE CANADIAN PRESS/Adrian Wyld
October 18, 2013 - 9:36 AM

BRUSSELS - After four years of opaque negotiations, the lid remains sealed on major parts of Canada's contentious free-trade deal with Europe.

"This is a big deal, this is the biggest deal Canada has ever made. Indeed, it is an historical achievement," said Prime Minister Stephen Harper, announcing the deal Friday with European Commission president Jose Manual Barroso in Brussels.

But the text of the so-called CETA agreement remains a private document that still requires "drafting and fine tuning" and will need a "scrub" from lawyers to make sure it is "legally coherent," a Canadian official said in Brussels on condition he not be identified.

It could be another 18 to 24 months before final European approval is given, and Canada will likely proceed along a similar time frame, the official said.

Ottawa instead released a 44-page overview and other summary documents. The material largely avoids specific details of what Canada had to give up to Europe, especially in sectors such as dairy and intellectual property protection in pharmaceuticals.

The official said the concessions include gains by European companies to bid on provincial and municipal contracts — the EU's No. 1 priority — as well as patent protection for drugs and better access for European cheese.

The documents trumpeted the buy-in by beef and pork producers, who gained additional access to the European market.

VIDEO: The Prime Minister inked a major free trade deal with the European Union in Brussels Friday. Stephen Harper says the so-called CETA agreement is the "biggest deal" Canada has ever done.

Friday's announcement comes amid accusations by the dairy sector's farmers of a government "giveaway."

"CETA will not affect Canada's supply management system, which will remain as robust as ever," says the government summary.

"The vast majority of supply-managed products will be exempt from increases in market access."

Canada would partially extend patent protection for brand-name pharmaceutical drugs, which would delay the introduction of cheaper generic drugs by up to two years.

The subject has the potential to spark discontent among the provinces because some estimates say that could increase the total bill on drugs for provincial health plans and consumers by more than $1 billion a year.

The official in Brussels said the government was discussing the possibility of compensation to the provinces on dairy and pharmaceuticals.

The government addressed the hot topic in its documents, saying it "supported innovation" that would support "high-paying jobs" in Canada.

"The agreement strikes an appropriate balance between rewarding innovators and ensuring that Canadians are able to reap the fruits of such innovation, from the latest technologies to a wide range of affordable, life-saving drugs."

The proposed deal is broad, intended to eliminate virtually all tariff barriers and many non-monetary impediments to trade, investment and even labour mobility between the two sides.

But ratification could be complex, perhaps requiring all 28 EU members to ratify, as well as a green light on key issues from Canada's 10 provinces.

Federal officials say they may need to compensate provinces for higher drug costs and damages to dairy farmers, mostly based in Quebec and Ontario, from provisions that will see the EU double sales of cheese in Canada.

Stephen Harper, with Governor General David Johnston, promised a  trade deal with the EU in the throne speech.
Stephen Harper, with Governor General David Johnston, promised a trade deal with the EU in the throne speech.
Image Credit: THE CANADIAN PRESS/Justin Tang

Documents released Friday paint a rosy picture of what Canada will gain from its biggest and most ambitious trade negotiation since the North American Free Trade Agreement of two decades ago, but brush over European gains.

They are considerable, including access to billions of government procurement dollars at the provincial and even municipal level — something not found in NAFTA — a de facto extension of drug patents by two years, and the eliminating of all tariffs in the lucrative auto trade that will give major European car makers a chance to increase sales through lower prices.

The Europeans also secured their demands on geographical indicators, which essentially patent the local names of their products, such as parmesan cheese.

In all, the agreement calls for the elimination of about 98 per cent of tariffs on both sides of the Atlantic from day one of implementation, and 95 per cent of agricultural products. Some tariffs are being phased out over seven years.

Canada also won some turf battles. Domestic car producers will be able to increase sales into Europe from the current 10,000 or so to 100,000 units under relaxed rules of origin, in addition to the phasing out of the EU's 10 per cent tariff on imports.

Beef farmers increased their quota by 50,000 tonnes, in addition to 15,000 tonnes for high quality beef, and pork farmers will see their quota rise to 80,000 tonnes from the current 6,000.

The catch is that Canadian producers will have to convert to hormone-free product for the European market, which experts say can add about 15 per cent to costs.

Punitive European tariffs on fish and seafood products will be phased out — 96 per cent immediately upon implementation — but Newfoundland will need to eliminate its minimum processing requirement that guaranteed jobs stay in the province.

Ottawa is uncertain about whether it will need to compensate provinces and industry because, officials say, it is not clear if there will be real damage.

For instance, EU's additional 16,000-tonne quota for cheese only represents 4.2 per cent of Canada's current market, which officials say is growing at 6,000 tonnes a year. Within the two-year implementation process, growth may be able to absorb all or most of Europe's increased sales.

Maarten Huiskamp cuts a piece of Dutch cheese in De Kaaskamer store in Amsterdam last week.
Maarten Huiskamp cuts a piece of Dutch cheese in De Kaaskamer store in Amsterdam last week.
Image Credit: AP/Peter DeJong

As well, it will be eight years before any impact of changes to patent protection for brand-name pharmaceuticals show up as higher costs for provincial drug plans, they say.

Some studies have estimated it could add $1 billion to drug costs, simply because cheaper, generic drugs will take longer to become available, but industry officials say it will be difficult to quantify that far into the future.

Ottawa has no plans at the moment to extend its offer of compensation, including to Ontario's complaint that handling changes under the deal will impact its wine and spirits industry.

Critics and supporters will add up sectoral and regional winners and losers.

But the big prize for Canada, say government officials, is in the deal's potential and the sheer size and wealth of the European market — 500 million people and an economy approaching $17 trillion — that will now be available to Canadian manufacturers, entrepreneurs, investors, service providers and even professionals, such as engineers, under improved conditions and mostly duty-free.

"Under CETA, not only will world-class Canadian products enjoy preferential access to the EU, Canadians will also have the tools and support they need to succeed in this lucrative market," the government's glossy information brochure on the trade deal boasts.

"The vast benefits will be shared by Canadians across the country, from those who produce primary products — for example minerals and agricultural products — to those who turn them into value-added processed and manufactured goods."

A joint study estimated bilateral trade will increase by about 20 per cent as a result, resulting in a $12 billion boost to the Canadian economy and the creation of about 80,000 new jobs.

The deal may also be a major political victory for the Harper Conservatives, who have made expanded trade a key plank of their economic agenda.

With success in dealing with a large, developed, sophisticated entity like the EU, Canada has also burnished its credentials as a willing partner in other trade talks, particularly in the Trans-Pacific Partnerships, India and Japan, say analysts.

— with files from Julian Beltrame in Ottawa

News from © The Canadian Press, 2013
The Canadian Press

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