Canada's EU trade talks catch U.S. attention

The heft of the larger European countries, it reasoned, would restrain the growing clout of the United States.

Rebuffed, Canada was drawn firmly into America's orbit. Sixty years on it has come back with a scaled-down plan, starting talks on Wednesday with the EU aimed at a bilateral trade agreement.

You can see why Canada would want to lessen its dependence on America, which bought 75.5 per cent of its exported goods last year and provided 63.4 per cent of its imported ones.

Yanked into recession by America, Canada worries that trade will suffer from protectionism (in the form of new Buy American provisions and country-of-origin labelling requirements on farm products) and Washington's moves to toughen up border security.

It is less clear what motivates the EU, which traded a mere $103 billion with Canada last year.

The EU did more than five times as much trade with China in 2007 and more than 10 times as much with America.

The estimated increase in bilateral trade of $35 billion annually, once the deal has been in place seven years, appears modest.

According to Catherine Ashton, the EU trade commissioner, by talking about trade liberalization amid rising global protectionism, the two parties are sending a "powerful signal."

Yet they are also sending a worrying message about confidence in the Doha round of global trade talks.

In 2006, Canada and the EU had put talks on a trade and investment treaty on hold pending the outcome of Doha.

Starting talks is easier than finishing them. Most Canada-EU goods trade is already tariff-free, which means the barriers left standing, such as those on farm products, are the hardest to knock down.

And there is always the danger that small trade spats, such as the one touched off on Tuesday when the European Parliament voted to ban the import of seal products, could fester and infect the broader talks.

Still, the prospect of a successful outcome caught the attention of American business.

The National Association of Manufacturers called on the Obama administration to negotiate a United States-EU agreement or risk being the only partner in the North American Free-Trade Agreement left out (Mexico signed one in 2000).

That 60-year-old Canadian dream of stronger transatlantic economic ties may yet come true.

Republished from the Winnipeg Free Press print edition May 8, 2009 A12