Canada’s EU trade talks could fall apart

NationalPost.com – Opinion/FinancialPost.com – Negotiators need to take the offensive in opening Canada to EU trade
September 22, 2010.   By Danielle Goldfarb and Louis Theriault

Canadian and European Union negotiators have made stunning progress toward a comprehensive Canada–EU trade agreement in the past year and a half. But the entire agreement could fall apart if narrow interests prevail, costing Canada access to a wider range of trade opportunities than most of us can imagine.

The EU wants to go big in this deal—and it is ready to go home without an agreement if only a narrow deal is on offer. But Canadian public discussion on the issue — when it exists at all — is dominated by a narrow approach. Some voices, for example, want to keep EU products, such as cheese, out of Canada; or they do not want to allow EU companies to provide services to Canadians. Media coverage tends to be narrowly focused on Canada’s exports of products to the EU. And many businesses seem unaware that we are even negotiating a deal, let alone a wide-ranging one.

In reality, the stakes in this negotiation are enormous. If there is no deal, Canadians will lose out on freer access to a deep and wide range of trade opportunities that dwarf the widely reported $35-billion in annual Canadian product exports to the EU. The Conference Board of Canada’s analysis of the full Canada–EU trade picture goes beyond the conventional measures of trade to cover a broader range of activities—including traded services and sales by Canadian affiliates in the EU. These measures reveal that Canada sells at least $150-billion worth of goods and services to the EU every year—more than four times the amount of product exports tallied in traditional export statistics.

Research In Motion’s BlackBerry further illustrates the need to think more broadly. As much as Waterloo can proudly claim the BlackBerry as local, it truly is a global product. Developed in Canada, the hundreds of components in the BlackBerry come from suppliers all over the world. RIM manufactures its new models in Canada, but once it is satisfied that it has worked out any production problems, it outsources manufacturing to lower-cost countries, such as Hungary, for sale worldwide. Moreover, the BlackBerry’s value goes beyond its components and manufacturing—the accompanying data and voice services that customers buy in the EU and worldwide represent a substantial proportion of the company’s revenues. Focusing on what we do best in Canada and what others do best elsewhere helps make RIM globally competitive—and has helped make the BlackBerry one of Canada’s few global brands. In turn, this approach allows the company to deepen its Canadian activities, and make important contributions to our economy. As the BlackBerry shows, a trade policy approach that does not recognize this wider range of interactions is out of sync with global business realities.

Canadians have much to gain from access to inputs, technologies, expertise, and products sold by EU companies. The Conference Board estimates that EU sales of goods and services to Canada are substantial—$440-billion in 2008 by our broader trade measure—and growing rapidly.

The Conference Board’s analysis also shows that Canada–EU supply chains make important contributions to each other, maintaining competitiveness through the exchange of raw materials, parts, and services. While Canada-U.S. supply chains are more integrated, their presence in each others’ chains has also plateaued. In contrast, there is growth potential in the Canada-EU relationship. A narrow trade policy stance would penalize the growth of these mutually beneficial activities.

Instead of putting Canadian negotiators into the tough position of playing defence, Ottawa and the provinces (who are also at the EU negotiating table) should give them the mandate to gain freer access to the best EU products, inputs, partnerships, collaboration, technologies, expertise, and investment. Of course, Ottawa should accompany this mandate with transitional help for people disadvantaged in the short term and safeguards to protect Canadians’ health and safety. And instead of limiting our negotiators to gaining access only for our products, we should direct them to prioritize our services trade with the EU. Barriers to Canada–EU services trade are often related to difficulties in moving people or establishing a local presence. The deal should therefore cover such issues as facilitating movements of temporary workers and opening up opportunities to invest and set up foreign affiliates.

Playing defence might protect jobs in certain sectors over the short term. But it could jeopardize the whole deal, and the associated broad range of long-term benefits that are now on a limited-time offer. To protect these benefits, forward-looking Canadian policymakers must go big — or go home empty-handed.

Financial Post
Danielle Goldfarb and Louis Thériault are the authors of Canada’s “Missing” Trade with the European Union, published by the Conference Board

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