Ontario, Quebec seek aid for dairy sector as provinces back EU trade deal

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The provinces have approved the free-trade agreement with the European Union, but key players Ontario and Quebec are insisting the federal government open its wallet to mitigate some of the impact, notably by compensating dairy producers.

The Prime Minister arrived in Brussels on Thursday night and plans to meet with Jose Manuel Barroso, President of the European Commission, on Friday afternoon to sign the agreement. They are scheduled to make brief statements, and Mr. Harper is expected to hail the deal with the market of 500 million consumers as a milestone.

But political and legal obstacles remain for the deal, which is unlikely to take effect before 2015.

The provinces' blessing will help shield Mr. Harper from some of the flak over concessions, but it could have a price. Ontario Economic Development Minister Eric Hoskins said he supports the deal, but called for Ottawa to cushion the blow for the province's pharmaceutical, wine and dairy industries. "We have raised these concerns with the federal government, and we will make specific demands of the federal government to mitigate the impacts on these key Ontario economic sectors," he said in a statement.

Ontario and Quebec want a formula to compensate dairy producers – an influential constituency in both provinces. The federal government has agreed to allow more than twice as much European cheese into the Canadian market tariff-free, increasing the quota by 17,700 tonnes.

The provinces are indicating that dairy compensation could be worked out in the two years it would likely take to ratify the trade agreement. A federal government source said Ottawa has assured the provinces it would look at help for dairy producers who are out of pocket, for example, if they are unable to sell their full quota, but argued the impact is likely to be small.

But Ontario's call for compensation goes further, including a suggestion Ottawa should act if Ontario wineries are hurt because the province has to drop "cost-of-service" fees that make European wines more expensive. And the call for the federal government to mitigate the impact on the pharmaceutical industry appears aimed at getting Ottawa to blunt the effects of changes to the patent regime demanded by Europe.

Canada rejected an EU demand for an extra five years of so-called data protection, the period in which generic drug companies are prevented from seeing a drug inventor's research and trial data so they can make their own versions of a medication.

But it did concede the EU's push for so-called patent-term restoration, which allows a company that invents a drug to seek an extension to the 20-year patent protection to make up for up to two years of the regulatory delays that prevented the drug from being sold earlier, Ontario sources said. That concession could affect Ontario's generic drug industry, and critics argue it would increase the cost of prescription drugs, but federal officials are expected argue the impact would not be felt for years.

In the meantime, the federal government, and the provinces can point to gains in other areas: increased access to sell cars and engineering services. European concessions will give beef producers a new $600-million market, and pork producers $400-million, producers' associations say. The increase for pork, notably, will benefit Quebec and Ontario farmers.

But while, according to federal offcials, all provinces have provided political assurances they back the deal, they may still have the power to push for federal programs to mitigate the impact. One key gain for the EU is access for European companies to bid on provincial and municipal contracts in Canada, although a source said it include allowances for provinces to demand local work. But the EU has always been nervous that provinces would not formally sign the deal, and want premiers to make strong public commitments.

The long period to ratify the deal while it is translated into several languages and pushed through the European Parliament and the legislatures of all 27 members might allow for bumps.

Canada has yet to agree to a related political treaty that guarantees respect for human rights. EU officials say it is unimaginable Canada would ever violate such a deal, but insist all their trade deals must be linked to the standard political treaty.

And three countries – the Czech Republic, Romania and Bulgaria – have signalled they are unlikely to ratify the trade agreement unless Canada lifts visa requirements imposed to deter asylum-seekers.