Canadian Manufacturing

Ontario warns feds it wants compensation for sectors hurt by EU trade pact

Ontario Economic Development Minister Eric Hoskins said his government will support the agreement but is concerned about the impacts on the pharmaceutical, dairy, wine and spirits industries.

OTTAWA—The Ontario government is warning the federal government it will be seeking compensation on some sectors that will be adversely impacted by the new Canada-European trade agreement.

In a statement, Ontario Economic Development Minister Eric Hoskins said his government will support the agreement in principle but said he is concerned about the impacts on the province’s pharmaceutical, dairy, wine and spirits industries.

“We have raised these concerns with the federal government and we will make specific demands of the federal government to mitigate the impacts on these key Ontario economic sectors,” he said.

Another key province, Quebec, said it is ready to issue its verdict but will wait until after the announcement to make its feelings known.

“I can only say the Quebec government wants a free trade agreement with the European Union, but the agreement has to be beneficial to Quebec, that includes the dairy producers,” said Melanie Malenfant, a spokeswoman for Finance Minister Nicolas Marceau.

“That is what we are working on now. We are working with them.”

The deal, which allows European cheese producers to more than double their shipments into Canada to more than 31,000 tonnes, could turn into a political landmine for Quebec Premier Pauline Marois.

Regional battle lines are already being drawn because the agricultural trade-off—a European quota of close to 70,000 tonnes for hormone-free beef from Canada, and even greater for pork—will benefit most producers in the Prairies, whereas Canada’s dairy industry is concentrated in Quebec and Ontario.

The beef and pork deal has been estimated to have a potential value of $1 billion for producers, with expanded access for other Canadian foodstuffs, including grains, adding another $300,000.

Dave Solverson of the Canadian Cattlemen’s Association also said Canada and Europe will recognize each other’s food safety regulations, diminishing the risk of non-tariff barriers being erected.

“If this deal is what we are led to believe it is, it is very good for beef,” he said.

Other provinces have already served notice they will be seeking compensation for changes to patent rules on brand-name pharmaceuticals that will delay the introduction of less expensive generic versions by up to two years. Some estimates suggest the cost to provincial drug plans down the road could exceed $1 billion.

Ontario’s complaint on wine and spirits involves a technical change to “cost of service” fees that could bring down the price of expensive European wines and increase competition for domestic producers.

A government official said Ottawa has been anticipating the provincial reaction, saying there will be a response after the announcement on what compensation might be available and to which sectors.

The official stressed that the deal in its entirety will provide a boost to Canada’s national economy, creating an estimated 80,000 new jobs once fully implemented.

Supporters of the agreement, which still has not been finalized or put into legal language, warned the overall benefits to the wider economy risk being sideswiped by entrenched interests. Some say the agreement could boost the Canadian economy by more than the $12 billion the government has claimed.

The pact encompasses most aspects of the Canada-EU economic relationship, from automobiles to financial services, intellectual property to government procurement, and of course agriculture, which in the past has been one of the toughest nuts to crack for trade negotiators.

It is expected to call for the phasing out of tariffs on European automobiles, while giving Canadian domestic manufacturers the potential to increase sales into the continent to 100,000 units, from the current 13,000.

There are also provisions to open up provincial procurement to European bidders, including public utilities, as well as on financial services, professional services and banking regulations.

With files from Maria Babbage in Toronto and Alex Panetta and Patrice Bergeron in Montreal.

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