10 Reasons Why the Canada-EU Deal is a Big Deal
The Harper government is aiming for a Canada-EU free-trade deal by year’s end. This is Canada’s first major trade deal since the Canada-U.S. free-trade agreement in the late 1980s.
The Canadian public has focused little on the deal, but it matters hugely for Canada. Here are 10 reasons:
1. Trade with the United States has been stagnant over the past decade. The U.S. will continue to be our most important trading partner, but companies need to also find growth opportunities elsewhere.
2. The EU is huge. The eurozone countries are in the midst of an economic crisis. Still, EU members have a combined economy of more than $17 trillion, larger than the U.S. market.
3. Canada’s share of trade with the EU has become significant. Goods exports to the EU represented more than 4.5 per cent of Canada’s trade in 2010. This is more than the share of goods exports going to China, India, and Brazil combined.
4. Trade with the EU is poised to become more important. A new study by the Conference Board of Canada’s Global Commerce Centre shows that Canada’s exports to the EU are poised to grow significantly (see chart). We estimate that share will grow to six per cent by 2025, and a trade deal could boost this further. Our less optimistic scenario shows slower, but still positive trade growth.
5. The potential goes beyond trade in goods. Canada and the EU engage in substantial, fast-growing services trade in both directions, as a previous Conference Board study shows.
6. The potential goes beyond exports. Canadians benefit from having access to the best European technologies, goods, services, and agricultural products.
7. The potential goes beyond trade. Canadian companies sell more in Europe (from their investments there) than they export directly to Europe.
8. Everyone else is doing it. Canada is not the only one negotiating with the EU. To take only a small sample, Mexico already has a deal, India is negotiating a deal, Japan launched trade talks just last week, and it seems likely the Americans are next. Without a deal, Canadian businesses would be at a disadvantage in that market relative to those who have an agreement.
9. The deal sets the stage for other opportunities for Canada. The Canada-EU deal will lend momentum to Canada’s other trade negotiations. Most notably, these include the Canada-India talks and the Trans-Pacific Partnership talks (involving the U.S., Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam).
10. A free-trade deal could be considered Canada’s contribution to a eurozone recovery. Canada has stayed out of – and should continue to stay out of – the eurozone debate and related financing. But, as a recent Conference Board briefing notes, Canada can contribute to a eurozone recovery by completing this deal, thereby boosting growth potential on both sides of the Atlantic.