Economy

Canada Could Blow EU Trade Deal

The Canada-EU trade deal is close to being derailed. Why Canadian SMEs should care

Written by Jonathan Hiltz

The business community has been buzzing for some time now about Canada’s efforts to secure a much-discussed free trade deal with the European Union.

John Manley, president and CEO of the Canadian Council of Chief Executives, recently made another push to seal the deal, urging Canada’s senior trade negotiators to finalize a free trade pact with the world’s largest consumer-driven economy after the U.S.

Read: Canada Pushes EU to Finalize Trade Deal

PROFITguide.com spoke with Lawrence Herman, an expert on international trade and international business transactions with Cassels Brock & Blackwell, to discuss about how small- and mid-sized exporters will benefit from the EU-Canada agreement.

PROFIT: Why is a free-trade deal with the Eurozone important to SMEs?

Herman: For one thing, the deal will increase access to the European market for Canadian producers of goods and services large and small. There are still significant [taxes] that apply to Canadian goods entering the European market and the EU maintains some fairly high tariffs on industrial products such as machinery and automotive parts. So bringing down tariff rates will allow Canadian exporters of products greater access.

On the agriculture side, both the Europeans and Canadians have a protected agriculture sector, but bringing down some of the entry barriers, particularly on beef and pork products, will be important for Canada.

PROFIT: Why the sudden push to get this finished?

Herman: The negotiations have been going on for a long time and you can’t continue these negotiations forever. As they drag on there’s a danger that more and more issues will start to unravel.  You have to move fairly decisively at a certain point in time and cap the negotiations with a final agreement.

The other problem is that the Europeans are starting to negotiate an investment deal with the Americans and as they start negotiating [with the U.S.] they may tend to lose interest in completing the Canadian negotiations. So there is a need to get this thing done, provided that it is in Canada’s interests. The business community generally sees this as an important agreement and that’s why John Manley and the Canadian Council of Chief Executives have weighed in on the discussion.

PROFIT: What issues are in danger of unraveling?

Herman: Let’s say one of the parties comes back to the table and says €˜to do the deal we need more concessions in this area’ and the other side says €˜well, if we’re going to give you more concessions in one area, then we’re going to expect compensation in another area.’  That’s what I meant by the agreement that has been achieved [has a danger of] starting to unravel.

PROFIT: Are there any concerns about the financial challenges within the Eurozone or is that not a factor?

Herman:  I don’t think it’s a factor in the large sense.  It is true the Eurozone is under tremendous pressure to get their financial markets in order and solve their debt issues, but Europe is a large and dynamic market and sooner or later things will start to improve.  In fact, the data I’ve seen shows that European economies are starting to show strength [from] increased exports, which of course is good for the economy.

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PROFIT: How close are we to finishing this free trade deal?

Herman:  I think it’s quite close.  I think we’re talking weeks, but there’s €˜many a slip between cup and lip’ and even though negotiators are settling all of the difficult last minute issues, it’s not a done deal until everything is done.  I think the odds are in favour for a deal, but there still is the possibility that it won’t get done.

PROFIT: How do you believe that this will change the rules of engagement if a deal were to go through?

Herman: What it will mean is that our market will be open further to European products and their market likewise will be open further to Canadian products.  We will get preferential access. In other words, they will give us trade benefits that don’t apply to the world generally, and we will give them preferential treatment for access to our market.  These agreements are concluded to give advantages to the trading partners over the rest of the world no matter what size your operations are.

Read: Tories Steady on Trade Portfolio

Originally appeared on PROFITguide.com