Canada in first free trade deal in six years
TheStar.com - Business - Canada in first free trade deal in six years
June 07, 2007
Canadian Press
GATINEAU, Que. — Canada has negotiated its first free trade agreement in six years, concluding a deal with four small European countries that potentially opens doors to the larger European community.
Trade Minister David Emerson trumpeted the comprehensive agreement with Iceland, Liechtenstein, Norway and Switzerland, members of the European Free Trade Association, as a signal to the world that Canada is prepared to aggressively pursue trade liberalization.
“This agreement is a major directional statement,” he told a business luncheon today. “It’s a statement that Canada is back in the game.”
As an example, Emerson announced that the government is also launching free trade negotiations with Colombia, Peru and the Dominican Republic, and that officials will begin talks within a few weeks.
Canada’s current bilateral trade with the four European nations is about $11 billion, about the same level of as with South Korea, which Emerson is also actively pursuing. But in terms of Canada’s overall trade, it is a small piece of the pie.
By way of comparison, two way trade with the United States was $626 billion in 2006, with oil and gas, auto parts and vehicles, wood products, chemicals and manufactured products the main goods that cross the border. This represents about 82 per cent of Canada’s international trade.
The European Union was Canada’s second largest partner at $76 billion in two way trade.
But Claude Wild, deputy head of mission at the Swiss embassy in Ottawa, said the importance of the agreement to Canada should not be underestimated because it gives Canada a new gateway into the broader European market.
The agreement remains to be drafted in legal language and a signing ceremony is expected later this year. And it must be ratified by Parliament.
The most likely source of opposition to the deal could come from Canada’s fledgling shipbuilding sector, which fears direct competition from maritime powerhouse Norway could undermine the industry.
“We’re absolutely concerned, but we haven’t seen the deal,” said Peter Cairns, president of the Shipbuilding Association of Canada. “If the phase-ins are long enough, then maybe this is the way to go, but the devil is in the details and we haven’t seen the details.”
Emerson said the agreement provides a 15-year phase out period on the 25 per cent Canadian duty, with a three-year grace period before any tariff cuts begin.
“This will give the industry a significant period of time to adjust to the new market conditions,” he said.
In his speech to the business luncheon, Emerson made clear he has little patience for individuals or businesses who oppose opening up the Canadian market to liberalized trade.
“Globalization is here,” he said. “It is not going away. It’s time to build Canada’s future by harnessing the powerful and positive potential inherent in international trade and commerce.”
In that vein, he said he is “cautiously optimistic” that the Doha Round of negotiations at the 150-nation World Trade Organization will conclude with a broad-based agreement, suggesting that the U.S. and Europe have moved further in dismantling agricultural subsidies than has been made public.
Reporting on Canada’s trade record and future plans, Emerson said his only worry is that Canada is not moving fast enough to keep up with its competitors on the trade front.
Despite a good year for exports, Canada is losing market share around the world, he said, and the main reason is that the country has fallen behind in signing agreements to help businesses secure market access.
In the six years since Canada last signed its last free trade deal with Costa Rica, the U.S. has signed 16 such deals, Chile 11, Mexico four and Australia three, he said.
“Even in North American, China is poised to overtake Canada as the top source of imports in the U.S.,” he said.
In conjunction with the minister’s speech, the government released its annual State of Trade document Thursday.
Emerson said Canada enjoyed a record year for exports in 2006, shipping out goods valued at $524 billion, while Canadian direct investment abroad increased to $523.3 billion, 14 per cent higher than in 2005.
As well, the trend toward expanding trade beyond the United States continued, with exports to other countries rising 14.6 per cent, also a record high.
But the good news ended there, said Emerson. Much of the export activity was due to the high demand and high prices for natural resources, not manufactured goods. In fact, exports of goods to the U.S. actually declined 1.9 per cent last year due to weakness in auto and forest products.
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