Uncharted Territory: EU Negotiations and Canadian Economic Policy

The CBC’s Chris Hall recently reported that Canada and the European Union (EU) are preparing to release the final details of a Comprehensive Economic and Trade Agreement. The announcement will be made on September 25, effectively ending a negotiating period that has lasted a staggering 10 months. According to the report, Prime Minister Stephen Harper flew to Brussels to sign an agreement-in-principle with EU President José Manuel Barroso, and the text of the full agreement will be made public as part of a formal summit to be held between the two sides in Ottawa. In today’s post we briefly examine postwar Canadian economics in an attempt to postulate the positive and negative implications of the pending Canada-EU free trade agreement.

Aside from oil pipelines, the Comprehensive Economic Trade Agreement (CETA) has arguably been a top fiscal priority of the Harper government’s economic stimulus plan. The deal would give Canada increased access to the Europe’s $17 trillion economy and 500 million population, but concerns stemming from uncertainties have arisen over the long course of negotiations. While issues such as the protection of intellectual property as well as private-public sector disputes have been at the fore, economists on both sides have called into question the so-called investor-state dispute mechanism, which would allow companies to resolve trade disputes through an independent tribunal rather than the courts of their residing country.  

The Harper government has been eager to sign CETA, and for good reason according to former Quebec Premier Jean Charest, who suggested in an interview with CBC Radio’s The House that EU trade negotiations with the United States are likely to overtake Canadian interests should the Canada-EU deal drag out. “On these kinds of issues there has to be a sense of urgency,” said Charest, who himself was involved in promoting formal discussions between Canada and the EU while in office. “We’re not going to hold the attention of the Europeans eternally. They have a lot on their plate.” Urgency seems to be the order of business, and the signing of CETA will represent further significant alterations to recent Canadian economic policy.

Prior to the Second World War, the Canadian economy remained heavily reliant on fiscal cooperation and trade with the British Commonwealth. War-torn and cash-strapped, Britain was forced to turn its resources inward during the immediate postwar period. As a result of this recovery effort, Canada had to look elsewhere to grow its economy in an attempt to support the requirements of increasingly significant Cold War security plan. Geography and mutual interests of an economic as well as strategic nature made the United States the most likely and perhaps ideal partner. Economic relations between Canada and the US benefited then as a result of circumstances that extended far beyond fiscal wants, and have since loomed large in both individual and collective policy-making on both sides of the North American border.

In 1986-87, economic cooperation with the US became paramount to Canada. That year marked negotiations of the Canada-US Free Trade Agreement (CUFTA). As important as CUFTA was at the time (and remains), Canada was (and is) relatively less significant to American economic policy than the US is to its own. It is for this reason that policy makers in Ottawa as well as officials and interests groups across the nation continuously attempt to influence American trade and commercial policies towards Canada through a mix internal and external means. The pursuit of closer integration resulted in the 1994 formation of the trilateral North American Free Trade Agreement (NAFTA), while the pursuit of external interests led to multilateral negotiations and the formation of the World Trade Organization (WTO), also in 1994. These policies were consolidated by the Canadian government of Jean Chrétien and the American administration of Bill Clinton, both of which favoured reintegration of North American economic cooperation. However, by the onset of the twenty-first century, Canada’s economic integration with the US was on steady decline. In 2000, goods and exports to the US accounted for roughly thirty-three per cent of Canada’s total GDP, compared to eighteen per cent percent in 2010. The US will likely remain Canada’s top trading partner for years to come, but globalization seems to preclude any possibility that sees Canada exclusively refocus internally within North America to boost its economy and stimulate economic growth.

Given the lack of recent economic history between Canada and Europe, it’s no surprise that the Harper government is both excited and cautious about the possibilities of a major free trade agreement. Charest also pointed out in his interview with CBC Radio that, “Canada is not even two per cent of the world economy. We’re important. We’re good. We’re interesting, but we need to seize the moment … that’s what these things are about.” CETA ultimately represents uncharted territory for Canada, and what will the implications be?