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14 November 2008
On October 16 2008 recently re-elected Prime Minister Stephen Harper and French President Nicolas Sarkozy, who holds the rotating EU presidency, met at a summit in Quebec City to discuss the possibility of a strategic partnership between Canada and the European Union, Canada’s second most important trading partner. Following this meeting, the leaders jointly issued a statement indicating their intention to work together to define the scope of an ambitious economic agreement that, once negotiated, will be more extensive than most other free trade agreements.
The leaders stated in their summit declaration that they intend to move quickly to establish a Canada-EU economic agreement. They intend to obtain mandates before the end of this year, thereby enabling the launch of negotiations as early as possible in 2009.
Although the details of the agreement have yet to be negotiated, the statement provides an indication of what can be expected.
The backbone of what will likely be formalized into an economic partnership agreement is set out in detail in the joint study released by the Canadian government and the European Commission earlier this week.
Canada maintains longstanding trade relationships with many EU member states, reflecting strong historical, political and cultural links. This trading relationship has gained momentum in recent years, amounting to roughly C$80 billion-worth of two-way trade during 2007. Investment levels are high and continue to rise. In 2006 two-way investment between the European Union and Canada was around €165 billion (C$263 billion). Nonetheless, the joint study revealed that there is much to be gained by deepening this economic relationship.
The joint study concluded that while the Canada-EU trade relationship is generally functioning well, there are clear gains to be realized by addressing tariff barriers, liberalizing trade in services and reducing certain non-tariff barriers to goods and investments in the form of discriminatory regulation and standards. In eliminating these barriers, Canada is expected to gain roughly €8.2 billion-worth (C$13 billion) of trade over five years. The European Union is expected to gain approximately €11.6 billion (C$18.5 billion) from trade over five years.
It is anticipated that significant gains will result from liberalizating trade in services. The European Union is Canada’s second-largest trading partner for trade in services. In 2007 the European Union exported approximately €11.1 billion (C$17.7 billion) in commercial services to Canada, including services in transportation, travel, insurance and financial services. In the same year Canada exported €9.3 billion (C$14.8 billion) in commercial services to the European Union, including travel, business services, transportation and construction.
Negotiations are expected to address barriers to trade in services between the two parties, such as:
According to the joint study, a barrier of particular importance for European business in the financial services sector is the 13 different bodies that regulate securities in Canada. The absence of an integrated national approach or of mutual recognition agreements between the various bodies poses difficulties for EU financial service providers.
One potential stumbling block is that certain issues are under provincial jurisdiction and therefore will require provincial cooperation to be fully implemented. This is particularly the case with respect to the opening up of provincial procurement systems to European participants. The agreement will aim to give European companies equal access to Canadian federal and provincial procurement markets (including in respect of trains and subways), and therefore full access to procurement dispute resolution systems. Similarly, Canadian companies are expecting to gain access to procurement systems in the EU member states.
In addition to the need to gain provincial support, other challenges for negotiations include:
With this announcement Canada and Europe have taken the first critical steps towards strengthening economic integration. This development could bring opportunities, such as:
Moreover, foreign parent companies with Canadian and European subsidiaries may also share in the benefits of such an agreement.
For further information on this topic please contact Cliff Sosnow or Elysia Van Zeyl at Blake Cassels & Graydon LLP by telephone (+1 613 788 2200) or by fax (+1 613 788 2247) or by email (firstname.lastname@example.org or email@example.com).
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Elysia Van Zeyl