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Canada-EU Trade: Free Trade Fever Up North

Just recently, Canadian Prime Minister Stephen Harper came to Montreal’s Board of Trade to laud the benefits of the Canada-Europe Trade Agreement (CETA). Choosing Montreal was a recognition of the support provided by the city’s business leaders and the Québec government for the free trade accord. Sitting at the head table was a former Conservative Prime Minister, Brian Mulroney (a Quebecer as well), who was the architect of the 1987 Free Trade Agreement (FTA) signed with U.S. President Ronald Reagan; Montreal’s new mayor, Denis Coderre; and Québec intergovernmental minister, Alexandre Cloutier, topping a who’s-who guest list.

Harper noted pointedly that, in contrast to the debates over the FTAs in the 1980s, there was a general positive reaction to the European accord. Granted, there remains at least two years for ratification from 28 countries, and CETA will need to be translated into 24 languages; but there appears to be no real threat to Canadian approval.

Back in 1987, the Mulroney government faced fierce opposition from labor unions, from Ontario—the largest Canadian province—and from the opposition parties in the federal parliament (Liberals, then led by former Prime Minister John Turner and the socialist New Democratic Party, then led by Ed Broadbent). It was a period in which the Canadian Left and Canadian nationalists coalesced to depict free trade as a threat to jobs, Canada’s social safety net, our autonomy as a nation, and Canada’s cultural identity. The same arguments surfaced a few years later, but to a lesser degree, when Mexico was added to the mix in 1993 to create the North American Free Trade Agreement (NAFTA).

While the fears were not unfounded, free trade did not reduce Canadian autonomy. Nor did it challenge national identity or undermine Canada’s social programs. Instead, it spurred greater expansion by Canadian entrepreneurs and producers into the larger U.S. market. Today, over $1.5 billion in goods are traded daily between the two nations, and it has brought more prosperity and greater diversity to the three economies of NAFTA.

Coming off what Canadians consider the general success of NAFTA, it is not surprising that Canada’s political class now recognizes the advantages that free trade represents for future economic growth.

The Mulroney-Reagan free trade accord, and later NAFTA, made the Canada-U.S. commercial partnership the largest in the world. Harper claims that CETA would represent an even greater achievement, because it will give access to a market of 500 million people with a GDP of $17 billion. It can be argued that the U.S.-Canada accord prepared the way. CETA’s initial acceptance by Canada’s political and economic leadership shows clearly that free trade fever has now gripped the U.S.’ northern neighbor.

The enthusiasm for market liberalization is no longer an isolated phenomenon. U.S. President Barack Obama has set high targets for U.S. exports since his election in 2008 (despite his initial coolness to NAFTA during the 2008 primaries). He indicated in his 2013 State of the Union Address that he also wished to pursue a trade agreement with the European Union. One of the reasons European negotiators sought to reach a successful agreement with Canada was the potential access to the entire North American market.

The Canada-U.S. commercial relationship, while significant and successful, has also demonstrated the limitations of regional accords. The U.S. is on the march toward energy independence; while Canada is currently the biggest oil and gas exporter to the U.S., it may not be for long. Even Canadian hydropower is affected by lower prices coming from an abundance of locally produced natural gas in the United States.

The prospect of a fall-off in energy exports to the U.S. has pushed Canadian officials to move aggressively in search of new markets for fossil fuel production. While Washington continues to debate whether to approve the Keystone pipeline to bring Alberta oil sands production south of the border, Canadian officials and producers are actively pursuing projects to export Alberta oil through British Colombia to Asian markets, as well as pushing for two major projects to bring oil and gas from the West to eastern Canada and beyond.

The uncertainty about the U.S. energy picture and its corresponding impact on Canada makes prioritizing the Trans-Pacific Partnership talks all the more critical. Today, with technology and innovation the buzz words for world economies both in the developed world and in the emerging nations, free trade has become the norm for economic growth.

Currently, Canada has free trade agreements with more than 10 countries, including some in South America (Chile, Colombia) and the Middle East (Jordan, Israel). Negotiations are also taking place with 60 other countries (including Japan, India, and South Korea). Canadian negotiators are keenly aware that some sectors are more vulnerable to international markets than others.

For instance, the European accord has raised some legitimate concerns for Canada’s domestic cheese industry, especially in Québec. At the same time, though, the Canadian government realizes that it may have to develop domestic compensation policies to offset external trade concerns, without affecting the momentum for free trade.

Trade negotiations have also brought collateral benefits in the form of strengthening Canadian federalism. For years, Canada has faced a threat to its survival posed by some nationalists in Québec who contended that the majority French-speaking province could only realize its full economic potential by separating from the rest of the country and establishing an independent state. Yet, Québec leaders have also been among the strongest supporters of free trade, from the early FTA accords to CETA. During the NAFTA debate in Canada, then-Prime Minister Mulroney found a crucial ally in then-Québec Premier Robert Bourassa to counter the strong opposition in many parts of English-speaking Canada. And CETA was largely the brainchild of former Québec Premier Jean Charest. One key to Québec’s fervent support was securing Ottawa’s approval to have a representative from the province at the negotiating table.

The context for CETA indicates that free trade is now seen by Canadians as a win-win proposition in a globalized economy. The agreement, should it be approved, will provide access to new markets and new initiatives, and this will help address one of our biggest national challenges as a federation—the need for more diversified economic growth.

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Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.
Tags: Canada, Canada-Europe Trade Agreement (CETA), Free Trade Agreement

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