For seven and a half years, Stephen Harper has been a transactional prime minister. But with the Canada-European Union trade deal, he is bidding to become a transformational one.
The Comprehensive Economic and Trade Agreement opens a market of 28 countries, 500 million people and an economy of $17 trillion to Canadian goods by removing 98 per cent of tariffs. A study indicates CETA will add $12 billion and 80,000 jobs to the Canadian economy.
It was also important for Canada to get this done before the EU begins free-trade talks with the U.S. In an EU-U.S. scenario, Canada would have been shunted aside. Instead, CETA will serve as a model for an eventual North American-EU Agreement, just as the 1987 Canada-U.S. deal was the template for NAFTA in 1992. It will also create momentum for the Trans-Pacific Partnership round of talks involving 20 Pacific Rim countries. And until the Americans do a deal with Europe, Canadian businesses will have competitive advantage over U.S. firms in access to European markets.
Meantime, Canada will be the only G7 country to have privileged access to the world’s two largest markets, the EU and the U.S. That gives Harper bragging rights around the G20 table, as well.
It was on the margins of the G20 meeting in Russia last month that Harper met with EU Commission President José Manuel Barroso. Harper’s message was that, after four years of talks, it was time to close the deal. Barroso’s response was that from then on, Harper should talk directly to him.
And so it went over six weeks.
Over Thanksgiving weekend, a deal was at hand. The government felt confident enough of success that a reference to completing negotiations was included in the throne speech. By Thursday, the prime minister was airborne for Brussels and Friday’s signing ceremony with Barroso.
By then, Harper knew he had the support of all the provinces. Not that Ontario and Quebec weren’t worried about their dairy farmers.
Ontario was also concerned about the higher cost of prescription drugs because of patent protections being extended by two years to fend off generic drugs. The federal government’s response was simple — don’t worry about it, we’ll look after it. Dairy farmers will be compensated. Provinces will have higher drug costs covered.
This is a very different federal-provincial context than the Canada-U.S. FTA, which was strenuously opposed by then-Ontario premier David Peterson. For the Canada-EU round, the provinces have been at the table all along. Indeed, the initiative began with the provinces when Jean Charest proposed it to the Council of the Federation, and Harper took it from there.
It’s a huge breakthrough that government procurement will be open to EU bids at all levels of government — federal, provincial and municipal. And this in a country where there are still significant barriers to interprovincial trade. In return, the European government procurement market of $2.7 trillion in products and services will be open to Canadian business.
How big is that? It’s 50 per cent larger than Canada’s GDP of $1.8 trillion. With enhanced access in bilateral markets, there’s certain to be a big increase in foreign direct investment in both Canada and Europe. Already, Canadian FDI in Europe is $181 billion at the end of last year, representing 28.5 per cent of Canadian foreign investment, while European FDI in Canada of $171.5 billion represents nearly 25 per cent of FDI in Canada.
For Harper, this trade deal is a huge win. While it lacks the scale of the Canada-U.S. FTA, it is even more sweeping in its scope. And in terms of avoided political obstacles, just getting the agreement of 10 provinces here and 28 countries over there is a major achievement.
More than that, Harper has finally done something big. This is not day-to-day management of the country. This is transformational stuff.
L. Ian MacDonald is editor of Policy magazine.
