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Harper Says Canada-EU Trade Deal ‘Historic Step’

Canadian Prime Minister Stephen Harper said a trade agreement with the European Union is a “historic” deal that will help his nation diversify exports away from the U.S.

“While Canada’s trade in the past few years has been diversifying, this is the unprecedented step to begin to broaden beyond the United States,” Harper said today in an interview with Bloomberg News in Brussels, after announcing Canada and the EU have reached an agreement in principle. “It’s historic in that context.”

With talks at the World Trade Organization stalled, the deal with the EU may become a “global standard” for treaties among other nations, he said.

“It’s a big deal for the world particularly to the extent this has started to open up a path for a possible U.S.-Euro deal,” Harper said. “It is of some import to the world in terms of where we are going.”

Canada’s reliance on the U.S. for three-quarters of exports took a toll in the last recession in 2008 with shipments slumping as global demand cooled. The U.S. and the EU began negotiations on a free trade deal in July.

The pact needs the approval of EU national governments and the European Parliament, and will eliminate about 98 percent of all Canadian and EU tariff lines when it comes into effect. The sticking points have included Canadian access to the EU’s beef and pork markets and European access to Canada’s dairy market as well as to Canadian public-procurement contracts at the sub-federal level.

Supply Management

Harper said while Canada’s dairy industry is opposed to the agreement, the system of so-called supply management has a chance of surviving afterward.

“The fact of the matter is that in terms of trying to protect that system, this deal actually goes a long way to do this,” Harper said. “Over time, this agreement serves their interest.”

According to a joint 2008 study by Canada and the Brussels-based European Commission, an agreement would increase annual Canadian gross domestic product by 8.2 billion euros ($11.2 billion), equivalent at the time to about 0.77 percent of the country’s output. The EU economy would grow its annual output by 11.6 billion euros, or 0.08 percent, the study said.

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.

NAFTA

Canada’s exports to the U.S. surged after signing a trade agreement with its southern neighbor in 1988, which was followed by the two countries signing the North American Free Trade Agreement with Mexico. In recent years those exports have been a weak part of Canada’s economy as shipments of automobiles and lumber to the U.S. dropped. Central bank governor and former head of the country’s export financing arm Stephen Poloz has said Canadian companies need to expand into new faster-growing markets.

“We are now pretty certainly going to be a central player in the global trading system, and in a world where global value chains are more important in terms of the production of economic activity,” Harper said.

Other countries should follow Canada’s example and resist protectionism that will weaken the global economy, he said.

“The single biggest risk to turning a short-term financial crisis into a long-term depression would be the growth of protectionism,” he said. “The single biggest way to make sure it is precisely the opposite is the trade system remains robust and in fact expands and becomes freer and more open.”

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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