Bringing Canada and Europe Closer Together

February 24, 2009

Thank you for the opportunity to appear this morning to speak to Bill C-2, the act to implement the free trade agreement between Canada and the European Free Trade Association (EFTA).

I suspect many Canadians would be hard-pressed even to name the four members of EFTA — Iceland, Liechtenstein, Norway and Switzerland — and might wonder whether the extensive negotiations that have led to this agreement are worth the trouble.  I want to say this morning that this agreement is important to Canadians, and that it matters for three reasons.

First of all, Canada’s commercial relationship with the EFTA countries is far more significant than most Canadians realize.  The group represents Canada’s fifth largest export market, accounting for $12.9 billion in two-way trade in 2007.  In other words, Canada exports more to these four countries than to all of South America.

Even though this agreement is limited to trade in goods, it is remarkably complete, immediately eliminating all tariffs on industrial goods with the single and important exception of Canadian imports of ships, where duties will be phased out over 15 years.  Canada also has been able to negotiate deals on agricultural products with individual EFTA members, ones that will save Canadian exporters in this sector an estimated $5 million a year.

The second reason this agreement matters to Canadians is that it represents our first bilateral trade deal with European countries.  Given EFTA’s close links with the European Union (EU), this agreement by itself will help Canadian companies tap into European supply chains.

It also offers huge symbolic value at a time when Canada is finally engaged in serious discussions that could lead to a much broader agreement with the EU.   The 27 member states of the EU represent the world’s largest market in terms of Gross Domestic Product, and it also ranks as the world’s largest importer, exporter and investor.

At the October 2008 Summit in Quebec City between Prime Minister Stephen Harper, European Commission President José Manuel Barroso and French President Nicolas Sarkozy in his role as President of the EU, the Leaders agreed to launch discussions that could lead to a truly ground-breaking bilateral agreement.

We and our counterparts in the European business community have called for a wide-ranging accord, one that would include: 

• elimination of all remaining tariff and non-tariff trade barriers;
  
• the opening of financial and other services markets;
  
• broader reciprocal access to public procurement;
  
• mobility of skilled personnel and service providers;
  
• stronger intellectual property protection;
  
• a sustainable energy and environment agreement;
  
• an ambitious regulatory cooperation agreement;
  
• convergence in competition policy and tax administration; and
  
• a binding dispute-resolution mechanism.

Government officials from Canada and the EU are currently sorting out what will and will not be included in the talks, and we are hoping that formal negotiations will begin this spring.  We already are seeing important progress, notably the historic open-skies agreement reached in December 2008.  This far-reaching air services accord will increase labour mobility, lower barriers to investment, promote more competition in the industry and stimulate tourism.

A broad Canada-EU accord clearly could have huge benefits to Canadian enterprises across many sectors, especially if the recession in our largest market, the United States, proves to be deeper or longer than we now expect.

In this context, failure to ratify the Canada-EFTA agreement would send a profoundly negative signal about Canada’s interest in pursuing closer ties with Europe and about our ability to follow through in ratifying a successful outcome in negotiations with the EU.

This leads me to the third main point I would like to make this morning.  We are now in the throes of what is clearly a severe global recession.  There is an understandable temptation to react to any downturn by turning inward, by taking steps to shut out competition from abroad in order to save jobs at home. 

The world learned the hard way during the 1930s that protectionism offers only false hope.  Putting up walls between nations is even more dangerous today than during the Great Depression because countries around the world are so much more dependent for their prosperity on international flows of goods, services and investment.

We have seen a clear example of protectionist impulses in action recently in the United States, where Congress insisted on the inclusion of a “Buy American” provision in that country’s massive fiscal stimulus package. 

Canadians obviously were concerned about the potential impact on our companies, and both we as Canadian business leaders and our government worked hard to dilute if not eliminate this provision.  But I want to point out to you today that the strongest opposition to the “Buy American” language in the stimulus bill came from the American business community itself. 

To cite one example, 50 business associations and 50 more individual companies signed a letter to Senate leaders stating bluntly that if enacted, these provisions would backfire, and harm American workers and companies across the entire U.S. economy.  “The resulting damage to our export markets and the millions of high-paying American jobs they support would be enormous.”

United States President Barack Obama made it clear during his visit to Ottawa last week that he understands and agrees.  He acknowledged the universal tendency to push what he called “beggar-thy-neighbour policies”, stating unequivocally that trade ultimately is beneficial to all countries, and assuring Canadians that “I want to grow trade, not contract it.”

As a trade-dependent economy, Canada has every reason to work with our partners — in Europe, in the United States, and around the world — to keep trade flowing as freely as possible.  I can think of no better way to do that right now than by moving ahead quickly with agreements such as the Canada-EFTA deal that bring old walls down instead of putting new ones up.

Thank you.  That concludes my opening comments, and I look forward to answering whatever questions members of the Committee may wish to raise.