Canadian Manufacturing

New trade deal big on ‘potential’ benefits—if Canadian firms can take advantage

Deal with Europe will be what businesses and Canadians can make of it, some observers say

OTTAWA—Prime Minister Stephen Harper calls it the “biggest deal our country has ever made”—and business leaders are reaching for even headier superlatives.

Indeed, analysts agree the new Comprehensive Economic and Trade Agreement (CETA) with the 500-million strong European Union (EU) market is the most ambitious Canada has even attempted—larger even than NAFTA in scope, if not impact—since it encompasses virtually every facet of economic activity.

But as details of the yet-unwritten deal emerged, even backers admitted to niggling concerns that much of what Canada stands to gain could be put in baskets best labelled “potential” or even “wishes.”

For all of its far-reaching implications, the deal will be what businesses and Canadians can make of it, some observers say—and at this early juncture, Europeans appear to be better placed to take full advantage.

“Opportunity” appeared to be among the most commonly uttered words used by the many stakeholder groups who lined up to bestow their blessing on the deal.

“Companies must be prepared to take advantage of this opportunity,” said Jayson Myers, president and CEO of Canadian Manufacturers and Exporters (CME).

“You can talk about, ‘It’s going to have this impact,’ but it’s something companies themselves (have) to take advantage of.”

Joy Nott, president of the Canadian Association of Exporters and Importers, described the deal as a “fantastic opportunity”—with a caveat.

“The biggest concern we hear is that because Europe is so much bigger than we are, if we don’t hit the ground running … they could overtake us and be benefiting before we see benefits.”

The Conservative government says the deal will provide a $12-billion boost to the Canadian economy and create 80,000 new jobs—significant numbers, but relatively modest given that the Canadian economy is worth more than $1.6-trillion, with nearly 18 million Canadians working today.

Industry leaders predict Canadian firms will take full advantage of what amounts to the dismantling of barriers—both tariffs and stifling rules and regulations—that have helped keep trade between the two entities relatively modest.

But there are no guarantees.

Beef and pork farmers have a significantly higher quota for selling into the EU balloon, although many will need to convert their production to more costly hormone-free lines—the deal insists on it—in order to capitalize.

Canadian automakers will be able to ship as many as 100,000 duty-free vehicles, up from the current 8,000, under relaxed rules-of-origin requirements.

Whether North American-assembled vehicles will sell in Europe remains an open question.

And on possibly the biggest “opportunity” in the deal, the opening up of government procurement at the national, provincial and municipal level: the Europeans have been playing the game for years, while most Canadian firms are rookies.

It was no accident that at the deal’s announcement in Brussels, European Commissioner Jose Manuel Barroso listed procurement—contracts for government services and installations—as the EU’s biggest win.

The EU fact sheet, something not found in the Canadian documents, lays out what’s at stake: The value of federal contracts is estimated at $15- to $19-billion annually, while provincial and municipal contracts exceeded $110-billion in 2011, adding that Canada had kindly agreed to create a single procurement website to “make it easier for European suppliers to compete.”

Trade lawyer John Boscariol of McCarthy Tetrault said that when Canadian companies think about exports, they mostly think the United States, whereas European companies are focused on the world.

“I know the Europeans are salivating over this procurement market,” Boscariol said.

“Obviously with companies like Siemens and others, they are larger commercial entities. Also European companies are used to working in different cultures, different languages, so they might have an initial advantage.”

But even if the Europeans are first off the mark, Canadian business leaders say they will adapt as they did with the U.S. free trade agreement, which also presented a bigger—and in many ways superior—rival.

The deal’s value isn’t tallied in the first few years, but over the long term—the next decade or two, they note.

“The theory of these trade agreements is, if you build it, they will come,” Boscariol said.

“You put in place a set or rules that give preferential access to Canadian companies. Eventually we should see them take advantage of that.”

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