Canadian companies now eyeing Canada-EU trade outcome

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Feeling a sense of relief following Donald Trump's remarks on the future of U.S. trade with Canada, business leaders are now hoping for a second wave of positive news out of Europe.

Corporate Canada is shifting its focus to Prime Minister Justin Trudeau's trip across the Atlantic later this week.

Mr. Trudeau's visit is expected to coincide with the European Union's ratification vote on its free-trade deal with Canada, an agreement nearly scuttled last fall due to opposition from a small region in Belgium.

"The Prime Minister is now off to hopefully put [the Canada-EU free-trade deal] in his pocket and bring it home from Europe, which would also be good news," John Manley, the president of the Business Council of Canada, said in an interview.

Canada is expected to ratify the deal after the European Parliament gives its okay.

The deal will still need the approval of the EU's 28 national parliaments as well as some regional governments. But 90 per cent of the deal is expected to come into force under what is known as provisional application.

Perrin Beatty, head of the Canadian Chamber of Commerce, agreed that it's important for the federal government to finalize the deal with the EU.

Business leaders in Canada said they were somewhat comforted by Mr. Trump's comments Monday after his first face-to-face meeting with Mr. Trudeau.

In particular, they highlighted the President's remark that the United States was in favour of "tweaking" the North American free-trade agreement, rather than ripping up or dramatically changing the deal, as Mr. Trump had vowed to do during the election campaign.

"We'll be doing certain things that are going to benefit both of our countries," Mr. Trump told reporters at a joint news conference in Washington with Mr. Trudeau.

"We will co-ordinate closely to protect jobs in our hemisphere and keep wealth on our continent."

There are expectations in Canada that the President's words will help lift business confidence after weeks of companies wondering what the future will hold.

But while Mr. Manley expected Canadian firms to be "somewhat placated" with regard to their concerns about the unknowns of Canada-U.S. trade, he said many key economic questions remain unanswered.

"There still has to be meat put on the bones – we don't know what tweaking NAFTA really means," said Mr. Manley, a former Liberal cabinet minister.

He said firms are still looking for clarity on the future of the congressional Republicans' proposed border-adjustment tax, which could have serious negative effects on Canadian exports to the United States.

Mr. Manley, whose group represents around 150 chief executives, also pointed to the possibility that Mr. Trump's promised infrastructure program could be fraught with Buy America provisions, which could force Canada to respond with similar measures.

However, the joint statement from Mr. Trudeau and Mr. Trump after Monday's meeting vaguely suggests both leaders might be envisaging an open border when it comes to government infrastructure.

"Given our shared focus on infrastructure investments, we will encourage opportunities for companies in both countries to create jobs through those investments," the statement reads.

Mr. Beatty said the uncertainty has created a "chilling effect" among his members, who have been telling him that they want to know the rules of the game before they make any multimillion-dollar investments in Canada. Some of those fears have eased, he noted.

"I think that people, as of today, have confidence that the relationship is fundamentally sound," said Mr. Beatty, who, however, expects firms to seek more clarity going forward.

"Again, I think everybody recognizes that there are contentious issues that we have to deal with between the two countries and it won't always be easy."

Rona Ambrose, the Conservative interim leader, said late Monday that the Liberals must make domestic changes to remain competitive.

Mr. Trump, she pointed out, has vowed to reduce energy costs, lower corporate and personal taxes and loosen regulations in the United States.

Ms. Ambrose accused the Liberals of introducing policies that have raised costs for Canadians – from a carbon tax, to an income-tax hike for top earners, to higher payroll costs for employers through the expanded Canada Pension Plan.

"We need to reassess the fact that we are leading this country down an uncompetitive path," Ms. Ambrose told reporters in Ottawa.

"We have to reassess what we're doing up here, and you know, as a lot of people have said, recalibrate and think about what impact this is going to have on us and our ability to create jobs."

When it comes to "tweaking" NAFTA, she warned that Mr. Trudeau must be careful to protect a target of U.S. officials in the past: Canada's protectionist, supply-managed dairy sector.

Later this week, Mr. Trudeau will leave on a four-day European tour that will take him to Strasbourg, France, where he will address the European Parliament, which is expected to vote to ratify the Canada-EU free trade deal.

Mr. Trudeau will also meet with German Chancellor Angela Merkel, who is arguably Europe's most influential politician.