Prime Minister Stephen Harper is touting free trade with Europe as the biggest opportunity for Canada since NAFTA, but businesses will now have to work hard and invest to reap all the potential spoils.
A framework agreement signed Friday in Brussels by Mr. Harper and European Commission President José Manuel Barroso would eliminate duties on tens of thousands of products, covering more than 95 per cent of everything Canada now sells to Europe, as well as dismantle a raft of non tariff barriers.
The two sides expect a final deal to be ratified within two years.
But the tough part still lies ahead for Canadian businesses as they go after this market of 500 million potential consumers.
The federal government said the potential gains from the deal will likely exceed estimates that it would create 80,000 jobs and inject $12-billion a year into the economy.
And yet many Canadian exporters worry they will be swamped by intense new competition from a much larger trading bloc.
“Because Europe is so much bigger a market than we are . . . if we don’t hit the ground running and we don’t learn as a nation to quickly take advantage of this deal, they could quickly overtake us,” said Joy Nott, president of the Canadian Importers and Exporters Association. “And they could benefit before we start to see benefit.”
Canadian companies are anxious to break into new markets and diversify away from the United States – the destination for more than 70 per cent of Canadian exports. And this agreement should spur them to do that, Ms. Nott said.
Canadian pork and beef exporters said free trade with Europe will boost exports by as much as $1-billion a year.
Martin Rice, executive director of the Canadian Pork Council, said processors will need to upgrade plants to conform to European standards.
“We already have plants approved to export to Europe,” Mr. Rice said. “Certainly, other plants will look very seriously to make investments to bring their plant up to where they will be certified.”
Pork producers will be able to ship 81,000 metric tonnes duty-free once the agreement is fully implemented. Mr. Rice said the deal’s phase-in period gives processors time to make those investments.
But he acknowledged that Europe will still be a relatively small part of the industry’s total exports – even with the deal.
Beef producers are getting an additional 65,000 tonnes of duty-free access.
Europe’s commitment to tackle various “technical” barriers is the key to making any trade gains “real and meaningful,” pointed out Suzanne Sabourin, director of regulatory and international trade at the Canadian Meat Council.
“If we don’t address these technical barriers to trade, market access may suffer,” Ms. Sabourin acknowledged.
The agreement could also cause significant dislocation among Canadian auto makers as tariffs are removed at home and in Europe during a seven-year phase-in period.
Manufacturers will also have to deal with new competition at home while they try to make major new inroads in Europe, according to Martin Lavoie, director of policy for the Canadian Manufacturers and Exporters.
Europe’s size is a challenge, but the deal will push manufacturers to invest and become more innovative, according to Mr. Lavoie.
“History has taught us that competition is good for productivity,” he said. “At the end of the day, companies will adjust. There will be more winners than losers in this deal.”
The Canadian dairy industry has cast itself as big loser. But Mr. Harper insisted that Canada has been granted full access to the European market for any producers willing to seize the opportunity.
But to do that, Canadian dairy farmers and processors would have to operate outside the tightly regulated supply management system, which dictates how much they can produce and the price they get for their milk.