Harper Says Canada to Soon Complete Europe Trade Pact

Canadian and European negotiators have reached an agreement in principle on a free trade pact, officials from both sides who are familiar with the matter said, speaking on condition they not be identified because the pact hasn’t been made public.

The agreement has been sent to Canada’s provinces for approval, the Canadian official said. Prime Minister Stephen Harper told lawmakers today his government will soon complete a free trade agreement with the European Union as part of efforts to expand exports and fuel growth.

News of the almost completed trade pact comes on the day Harper releases a mid-term update of his government’s agenda, which will include steps to sustain economic expansion by promoting exports and investments and additional measures to lower phone and cable bills for consumers. The so-called Speech from the Throne is scheduled for about 5 p.m. Ottawa time, marking the opening of a new legislative session.

“We must keep our eye on the long term,” Harper said in comments to lawmakers, according to remarks provided to reporters by the Prime Minister’s office. “For Canada to prosper through the challenges of this uncertain world, we must do more.”

Harper has sought to diversify the nation’s trade away from the U.S. to fuel the recovery as the world’s 11th largest economy struggles to build momentum, in part because of weak exports. Canada has averaged annualized quarterly growth rates of 1.3 percent since the start of 2012, down from 3 percent in 2010 and 2011, according to Statistics Canada data. The economy has added 113,100 jobs so far this year, on pace for its second worst annual result in the past decade.

Negotiations Dragging

With European trade negotiations dragging into a fifth year, Canadian executives have been warning that Harper was running out of time to complete an agreement amid concern that talks with the U.S. will leapfrog Canada as a priority for Europe. Canada’s largest manufacturing lobby group called on provincial leaders today to back the agreement.

“Canadian manufacturers and exporters hope that we can count on your support when negotiations are finally concluded,” the Ottawa-based group said in an open letter to provincial premiers. It is “a critically important agreement.”

The pact includes doubling the amount of European cheese that can be imported into Canada, the National Post newspaper reported, without saying how it obtained the information.

Throne Speech

Harper sought to break a deadlock over issues such as beef and dairy exports by stepping up his involvement in negotiations, people familiar with the strategy said in September.

A successful trade pact with the EU could help Harper burnish his reputation as a competent economic manager, an advantage he holds over his rivals. Even as the ruling Conservatives have fallen in public opinion polls amid an expenses scandal implicating some of his lawmakers, Harper continues to have an edge on economic issues, surveys show.

An agreement would also bolster the EU’s efforts to negotiate a deal with the U.S., which would be the largest trade pact in history. EU Trade Commission Karel De Gucht said in September the talks, which began in May 2009, were in the final stage. “Sometimes it happens that the final stage is not so easy,” he told reporters in Brussels. “So we have still a difference of opinion on a very limited thing, but one thing that is considered to be very important by both sides and where we have to find the right balance.”

Significant Differences

Harper met European Commission President Jose Barroso on the sidelines of the Group of 20 leaders summit in St. Petersburg, Russia. Harper told reporters following the Sept. 6 meeting that “significant” differences remain in the negotiations.

Canadian companies such as Toronto-based insurer Manulife Financial Corp. (MFC) and Montreal’s commercial-jet maker Bombardier Inc. (BBD/B) have backed an agreement, while European companies including engineering conglomerate Siemens AG (SIE) of Munich and London-based miner Rio Tinto Plc (RIO) are supportive.

Canada has relatively more to gain from a deal, according to a joint study released in 2008 by the Canada and the European Commission. An agreement would increase annual Canadian gross domestic product by 8.2 billion euros ($11.1 billion), equivalent at the time to about 0.77 percent of the country’s output, the study found. The EU economy would increase its annual output by 11.6 billion euro, or 0.08 percent.

Beef Shipments

While the EU bought 8.9 percent of Canadian exports in 2012, Canada represented 1.9 percent of total EU exports, according to Statistics Canada and Eurostat data. The U.S. received three-quarters of Canada’s exports in August.

Canada wanted its beef producers to be allowed to export more than 40,000 metric tons to Europe, according to Matthias Brinkmann, former EU ambassador to Canada.

Greater concessions on beef will help Harper sell an agreement to Canadians that may increase the cost of prescription drugs by expanding patent protection for European pharmaceutical companies, harm Canadian dairy farmers and take away power from cities and provinces to choose suppliers for procurement projects.

For its part, the EU wants to use a Canadian free trade agreement as a template for its trade talks with the U.S.

To contact the reporters on this story: Andrew Mayeda in Ottawa at amayeda@bloomberg.net; Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net

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