Potential U.S.-EU free-trade union ‘puts the squeeze’ on Canada

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The spectre of the United States and Europe joining forces in a sweeping free-trade union ratchets up pressure on Canada to conclude its own transatlantic deal in the next couple of months.

After nearly three years of negotiations, Canada and the European Union are close to reaching a final agreement. But a handful of politically tricky issues remain unresolved, including access for Canadian beef and cars in Europe, how much duty-free European cheese gets into Canada, plus pharmaceutical patents and government contracts.

Both sides have good reasons to want a deal soon. Europe wants to lay the groundwork for its looming negotiations with the United States, expected to start in June. Europe is also poised to open trade talks with Japan in April.

"It puts the squeeze on us to get going and finish our deal with the EU," agreed John Weekes, a former top Canadian trade negotiator and now an adviser with law firm Bennett Jones in Ottawa.

U.S. President Barack Obama said in his annual State of the Union address Tuesday that talks are being launched on what would be the most comprehensive free-trade deal in history, accounting for half the world's economic output and one-third of global trade movements.

The risk for Canada is that the Europeans turn their attention to markets that offer much richer potential gains, said trade lawyer Lawrence Herman of Cassels Brock in Toronto. After Canada-South Korea free-trade talks stalled in 2008, both the United States and Europe quickly did deals there, giving their exports a competitive edge.

"We don't want to be lost in the dust as the Europeans forge ahead with the U.S. talks," Mr. Herman said.

Canada must also worry about the U.S. getting "a better deal" with the Europeans, Mr. Weekes said.

"We are going to be looking at some point at, 'How do we catch up?' This is competitive trade liberalization at work," Mr. Weekes said.

A report released this week by a high-level U.S.-EU working group suggests the deal would leave virtually nothing off the table, including sensitive areas such as agriculture and government regulations. Perhaps more importantly, the two sides see their proposed free-trade agreement as a model for a new rules-based trading system for the developed world, providing a counterweight to the protectionist trade practices of China, India and other emerging exporting powers.

"They are looking at … an overarching bilateral co-operation agreement with a view to shaping the architecture of the world," Mr. Weekes said.

But experts caution a U.S.-EU deal is still a long way off. Mr. Obama must secure trade negotiating authority from Congress, and the politics of free trade remain controversial in Europe as well.

The head of the European Commission, meanwhile, said a free-trade deal between the EU and the U.S. is a logical step in the context of other bilateral agreements being discussed.

"We [the EU and the U.S.] both need growth," and other deals being negotiated – such as one with Canada – are leading the way, European Commission President Jose Manuel Barroso said at a news conference in Brussels Wednesday. The Canada-EU talks are an example of positive momentum, adding that the two parties are "close to concluding" a pact.

EU trade commissioner Karel De Gucht, in Ottawa last week for talks with Canadian Trade Minister Ed Fast, said he is confident a deal can be reached "in the coming weeks," but noted a number of issues remain unresolved. "Quality goes before speed," he added.

Rudy Husny, a spokesman for Mr. Fast, said that talks are at "a well-advanced stage" and that "focused discussions" are continuing on the outstanding issues.