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The Harper government claims that a free-trade deal with the European Union will result in a “$12-billion annual boost to Canada’s economy.” (Paul Darrow for The Globe and Mail)
The Harper government claims that a free-trade deal with the European Union will result in a “$12-billion annual boost to Canada’s economy.” (Paul Darrow for The Globe and Mail)

Economy Lab

Canada-EU trade deal: It’s time to make the hard choices Add to ...

The first big test for Prime Minister Harper’s ambitious trade negotiations agenda will come late this year with the expected climax of the negotiations between Canada and the EU. The outcome will determine the credibility of the government’s trade agenda. EU negotiators were in Ottawa last week to tackle some of the remaining issues and we are fast approaching the time for hard choices about its final content.

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The Harper government asserts in the Budget that a comprehensive economic and trade agreement (CETA) with the EU will result in a “$12-billion annual boost to Canada’s economy.”

But what does this ambitious trade agenda really mean for Canada and Canadians? We will have much better idea once we see what Canada can get from the EU. There is a big difference between launching a negotiation and making the necessary concessions to complete and implement it. For its part, the federal government continues to hold the cards close to its chest.

These negotiations go beyond market access for goods and services to set rules on investment and intellectual property that reach well inside the border. Decisions made by governments in the closing phase of these negotiations will have major impacts on investment decisions and public policy.

One area where such issues are very much in play for Canada is in the pharmaceutical sector. The EU is pressing Canada to adopt tighter disciplines on intellectual property that would benefit international brand-name drug companies but increase health care costs and damage generic drug producers.

We learned recently from B.C. Premier Christy Clark that she and her colleagues from other provinces oppose these proposals, which would increase the cost of drugs. The stakes are high. Two leading health economists have suggested the cost of prescription drugs in Canada would rise by some $2.8-billion annually if three EU proposals for pharmaceuticals are included in the final agreement.

Put another way, these EU proposals have the potential to cut the potential “$12-billion annual boost to Canada’s economy” by more than a quarter, to $9-billion.

And that figure doesn’t include the damage to the generic industry itself, and its contribution to life sciences and the manufacturing sector. For Canadian generic producers, these proposals would inevitably reduce their participation in international markets.

On the other side are the brand-name drug companies, who assert that extended protection of their patents is needed to justify the huge investments required to develop new drugs. They are the ones who are behind the EU proposals. However, they have never been able to establish that increased intellectual property protection will lead to more research and development.

In considering hard choices it is important to underline that there will be significant exceptions on both sides of the Atlantic. An indication of what is in store can be found in the leaked 267-page list of proposed federal and provincial exceptions to potential new rules on investment and cross border trade in services.

The government must soon make up its mind on a number of difficult questions, which will have important impacts on jobs, the business environment and a range of public policies.

The list of countries with which Canada is negotiating free trade agreements or actively trying to deepen economic relations is breathtaking. Negotiations are under way with a range of countries including the European Union, Japan, India and Korea, as well as Morocco and a group of Caribbean nations. The government is seeking admission to the TransPacific Partnership negotiations involving the United States and eight other Pacific states, and is working to deepen trade and economic relationships with China.

Canadians may have been lulled into a sense of complacency by the lack of detail in government pronouncements on its free trade agenda. It’s time to start paying attention.

John Weekes, a senior business adviser at Bennett Jones LLP, was Canada’s ambassador to the WTO and chief negotiator for the NAFTA

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