On balance, Canada-EU trade deal a move in the right direction

(Published in the Waterloo Record on November 2, 2013:  http://www.therecord.com/opinion-story/4187196-on-balance-canada-eu-trade-deal-a-move-in-the-right-direction/ )

At first glance, pulling off what Stephen Harper’s government has called the Wayne Gretzky of international trade deals is certainly to be applauded.

Based on the limited documents so far released by the government of Canada on the “agreement-in-principle” reached with the European Union on a comprehensive economic and trade agreement, the agreement offers significant improvements for Canadian exporters, and the promise of decreased costs for a variety of imports.

Whether they’re of the Gretzky variety is debatable given that prior to this agreement, three-quarters of tariff lines for trade between the two parties was already duty-free, and the average tariff on Canadian exports was a paltry two per cent. However, what’s clear is that the trade agreement helps solidify the diversification of the Canadian economy away from its gravity-induced dependence on the United States.

In so doing, Harper completes a process of economic diplomacy that began in the early 1970s when then-prime minister Pierre Trudeau proposed Europe as a “third option” and the key to lessening Canada’s economic dependence on the U.S.

The agreement will certainly have its critics. Some sectors of the economy, notably those previously protected by closed government procurement processes, will now face increased competition and potentially pressure on margins.

However, complaints about increased imports, for example from the Canadian dairy industry, are likely unfounded given the still-tiny share of European cheese in our consumer baskets and the unlikely event that French blue cheese will replace cheddar in many of our grilled cheeses.

Important questions remain, however, regarding the effects of increased patent protection on medicines and the subsequent impact on provincial health care budgets, as well as the impact of changes on labour mobility for contract workers.

Moreover, the gains from the trade agreement are likely to be nowhere near those advertised by the Canadian government. The government’s oft-quoted $12 billion and 80,000 jobs increase is based on a series of assumptions related to market share and productivity increases that most serious commentators have noted are unrealistic.

Perhaps most disappointing about the comprehensive economic and trade agreement process has been the lack of public engagement.

In the 1980s, a joint Senate-Commons committee held thousands of public hearings on the topic of U.S.-Canadian trade, and on the then-proposed U.S.-Canada free trade agreement.

On the comprehensive economic and trade agreement, however, there has been no such public participation.

The government has done little to engage Canadians on the topic, with only leaked versions of negotiating texts available via European sources prior to the announcement of an “agreement-in-principle” in October. Our understanding of whether this is truly a Gretzky-type deal is thus limited by a lack of detail and fine print.

This, however, should not obscure from the trade deal’s importance. Not so much for its immediate economic impact but rather that as a small, trading nation we need to keep a step ahead of our competitors.

The launch of U.S.-EU talks on a transatlantic trade agreement between the world’s two largest economic blocs placed significant pressure on Canadian negotiators. Had Canada failed in its talks with the EU, the Europeans could have turned to the U.S. and offered privileged access to U.S., rather than Canadian exporters.

Given the similar basket of non-resource goods and services originating in both Canada and the U.S., allowing four years of negotiation to lead to failure would have meant significant disadvantages for Canadian producers and consumers.

Let’s just hope that the final negotiating text, if we ever get to see it, doesn’t include any unforeseen surprises.