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European Commission President Jose Manuel Barroso poses with Canadian Prime Minister Stephen Harper, left, ahead of a meeting at the EU Commission headquarters in Brussels October 18, 2013. The European Union and Canada are expected to close talks on a multi-billion-dollar trade deal on Friday that will integrate two of the world's biggest economies, if they can overcome final disagreements ranging from medicine patents to feta cheese.FRANCOIS LENOIR/Reuters

British Columbia's international trade minister says the federal government will compensate the provinces for higher prescription drug costs associated with the proposed Canada-European trade deal.

Teresa Wat said Friday that B.C. received a letter from federal Health Minister Rona Ambrose saying Ottawa will offset higher prescription drug costs linked to sections of the trade pact that extend prescription drug patent protection to European companies.

Prime Minister Stephen Harper was in Brussels, Belgium Friday to sign an agreement in principle on a free trade deal with the European Union that removes most tariffs and allows Canada to sell everything from B.C. cherries in Paris and Nova Scotia lobsters in Berlin.

Wat said the trade deal would give preferential treatment to B.C. companies selling goods and services to European Union countries — the world's largest trading block with a combined gross domestic product of $17 trillion and population of 500 million people.

"We anticipate important sectors of the B.C. economy will benefit from an agreement that will come into place hopefully in two years time," she said. "About 98 per cent of the tariffs are expected to be removed and there will be increased investment and removal of trade barriers."

Wat said she expects B.C.'s forestry, agriculture, fish, seafood and mining industries will benefit from easier access to European markets. She said B.C. products, including wine, blueberries, cherries and value-added wood products will open to a huge new market.

"One in five jobs in B.C. is dependent on export trade," she noted.

Wat said the federal government's pledge to compensate the provinces for expected increases in drug costs due to the proposed trade deal's extension of patent protection to European drug companies is being considered a major victory for the provinces.

"We were concerned about that since day one," said Wat. "The federal government was fully aware of our concerns."

She said provincial advisers have consistently told federal trade negotiators that increased drug costs would be a major stumbling block to gaining provincial approval of the deal.

"We just got a letter from the federal health minister assuring us they are fully aware of the implications of public drug costs and they will compensate us fully for any incremental increases as a result of this CETA," said Wat.

Wat did not provide a copy of the letter from Ambrose.

An internal federal government report estimated the patent extension could add up to $1 billion a year to drug costs, simply because cheaper, generic drugs would take longer to become available, but industry officials say it will be difficult to quantify that far into the future.

Harper also said his government would provide compensation to "fully address" any negative effects on the dairy industry, and said he has the support of Quebec and Ontario.

B.C.'s Opposition New Democrat Leader Adrian Dix said compensating the provinces to pay higher European drug costs ultimately cuts funds for public health care in Canada.

"This is federal money that could go, not to compensate multi-national drug companies, but to support public health care," he said.

B.C. Chamber of Commerce President John Winter said the deal represents a trading milestone for Canada that slashes barriers and opens markets for B.C. products.

He said of the $326 million in wood products exported to Europe from B.C. between 2009 and 2011, the exports faced tariffs ranging from 2.2 per cent to 10 per cent.

Winter said between 2009 and 2011, B.C. exported an average of $55 million worth of fish and seafood products to the EU annually. The fish and seafood exports faced average tariffs of 11 per cent with peaks of 25 per cent.

Winter and Wat said they are now urging the federal government to embrace other international trade negotiations with B.C.'s priority markets in the Asia-Pacific region.