Trade talks and tax havens are poised to dominate Stephen Harper’s European tour next week, but neither issue is shaping up to be a source of political good news for a Prime Minister enduring one of the most politically challenging periods of his more than seven years in office.
The Prime Minister’s spokesman is playing down expectations that a free trade deal with the European Union will be inked during the trip, even though Canada intensified negotiations in recent weeks in the hope of ending the negotiations. Mr. Harper will visit London, Paris and Dublin before G8 meetings in Lough Erne, Northern Ireland, in the June 11-18 trip that includes a speech to the British Parliament and a visit with the Queen.
Inking a positive deal with Europe would be a major political accomplishment for the Harper government at a time when the Conservatives are under fire domestically over Senate expenses. Opening a new free trade zone would be expected to boost the economy by giving Canadian firms more access to the European market. Potential benefits for Canadians would include access to a broader array of European products, such as cheese. It would also mean more competition for Canadian firms.
But Andrew MacDougall, the Prime Minister’s director of communications, said he does not expect a deal will be reached during the trip.
“We’re actually trying to sign the most comprehensive trade agreement that Canada’s ever signed. It involves multiple levels of government and we’re not there yet. We’re down to a few outstanding issues,” he told reporters in Ottawa Friday. “I won’t speculate or comment on what they are, but negotiations are ongoing and I don’t expect that we’ll be in a position to sign a deal next week.”
“But that said, we’re at the negotiating table pressing hard and we’ll continue to negotiate hard in Canada’s interests.”
Meanwhile, British Prime Minister David Cameron has made cracking down on tax havens a priority for the G8 summit, yet a host of non-governmental organizations monitoring the negotiations say Canada is blocking agreement on some of Mr. Cameron’s key proposals.
Mr. Cameron said this year that he wants new rules aimed at “shining a light on company ownership, land ownership and where money flows from and to.” Advocacy groups – such as Avaaz, Global Witness and Canadians for Tax Fairness – say their sources indicate Canada is resisting calls that would require countries to publicly report the names of the primary owners of companies. The proposal – called beneficial ownership – is meant to prevent problems associated with shell companies. They say Canada is also resisting a British proposal for countries to automatically exchange financial information so that countries are aware of any offshore accounts their citizens or registered corporations may have.
That would fit with recent developments in the House of Commons, where the Conservative-dominated finance committee chose not to recommend automatic exchanges after studying the issue of offshore tax havens earlier this year.
The committee’s final report did however call on Ottawa to require companies to report beneficial ownership. It also pledges support for continuing international efforts to “address base erosion and profit shifting.”
Both Prime Minister Cameron and U.S. President Barack Obama are facing domestic pressure to crack down on perceived tax avoidance by multinational corporations. Recent reports on the tax policies of companies including Apple Inc. and Starbucks have become political lightning rods, as governments look for ways to block corporate income tax revenue from fleeing offshore.
The finance committee had heard from Paul Collier, an adviser to Britain’s G8 team and an economics professor with the University of Oxford, who said the on-request – rather than automatic – systems supported by Canada are “not working.”
“I believe we need to move to automatic exchange of information,” Dr. Collier told MPs in February. “The G8 in Britain is a real opportunity, a rare opportunity, to get that co-ordination. Canada will not be disadvantaged as long as it moves alongside the other G8 members.”
Some in the banking sector, including RBC Royal Bank’s deputy chief anti-money-laundering officer Russell Purre, told MPs he would advise “some caution” with the idea of automatic international exchanges of banking information.
A senior Canadian official involved in the summit negotiations insisted the positions of Canada and the U.K. are close.
“It’s very safe to say that we’re very well-aligned with the U.K. in broad terms on actions to combat tax avoidance, tax evasion and promote corporate transparency,” said the senior government official.
The group Avaaz.org has obtained more than 120,000 supporters for a petition calling on the G8 to “implement tough, binding measures to combat tax evasion.”