Tories counting on Merkel’s support to turn tide on free-trade deal

Share

The Conservative government is expecting a strong endorsement on Thursday from German Chancellor Angela Merkel as Canada seeks to conclude a free-trade agreement with Europe, the most ambitious trade accord this country has attempted in a generation.

Ottawa hopes that Ms. Merkel will urge negotiators to conclude an agreement by the end of this year. Such emphatic support would be noticed in other European capitals.

"It would be even better if she agreed it should happen before the end of this calendar year," a government official said, speaking not for attribution. The official maintained that, while there are still issues to settle, Ottawa is confident a deal is within reach. Free trade with the EU would be the most important such accord the federal government has achieved since the Canada-U.S. free-trade agreement of 1988.

Ms. Merkel is in Canada for talks with Prime Minister Stephen Harper on the negotiations and to discuss the troubled global economy. The two leaders had dinner on Wednesday at the Prime Minister's summer residence at Harrington Lake. Further talks are scheduled for Thursday. A government official described the dinner, which went late into Wednesday evening, as " a warm and involved discussion." The two talked on a wide range of issues, involving trade, the European and global economy and collective security over a meal with elk as the main course.

Mr. Harper is eager to get the Canada-European trade deal done by the end of the year – the first of a long list of trade negotiations under way. And a public commitment from Ms. Merkel, leader of Europe's largest economy, would give the talks a lift as negotiators grapple with the sensitive issues that remain, including government purchasing, agriculture, and intellectual property, especially drug patent protection.

"Ms. Merkel's endorsement in finishing the negotiations will be an important boost to the process," agreed Lawrence Herman, a trade lawyer with Cassels Brock in Toronto. The deal is 80 per cent done, he estimated. But the the most difficult issues are largely unresolved. In particular, Europe is looking for tougher patent protection for prescription drugs – a concession Canadian provinces worry would inflate drug costs. On all unresolved matters, Ottawa, 13 provincial and territorial governments and 27 European countries will want to continue protecting at least some of their turf. The provinces may, for example, want to keep hospitals and health care out of the deal. The key is to make sure these exceptions are worth roughly the same on both sides.

Canada is also anxious for access to European markets for pork and beef, while European countries want to increase exports of dairy products to Canada.

Although Ms. Merkel can't speak for other leaders, Germany's dominance within the EU and its strong support of increased trade with Canada should serve as a powerful incentive to conclude an agreement. When François Hollande replaced Nicolas Sarkozy as president of France in May, the German ambassador in Canada offered to reach out to his French counterpart to help win over the new government, the official said.

At a personal level, Mr. Harper and Ms. Merkel see eye to eye on many issues. They are the two longest-serving members of the G8. (Russian President Vladimir Putin left and returned.) Both are conservative politicians who lead governments that weathered the global recession better than many other developed countries.

But Mr. Harper and Ms. Merkel are not in accord over everything. Tension over Canada's refusal to make a pledge toward an IMF bailout fund to aid Europe in June led Germany's ambassador to Canada, Georg Witschel, to complain about Canadian recalcitrance. However, tensions appear to have cooled on the issue. German officials told The Globe this week that the Chancellor will raise the issue with Mr. Harper during the meetings, but that there will not be any "arm twisting" because both sides know where the other stands.

Speaking with reporters on Wednesday, Finance Minister Jim Flaherty made clear that Canada has no intention of changing its mind. "It's not necessary for Canada to use Canadian resources to help solve the European problem, given that the European countries are among the wealthiest in the world," he said. While there has been some progress, "not enough has been done," Mr. Flaherty maintained. "They need to do much more."