Canada-EU trade talks hung up on beef market access issue

The Canada-European Union free trade talks are nearing an end with agriculture issues the last major stumbling block to an agreement both sides say will boost economic growth, the EU ambassador Matthias Brinkmann said Thursday.

In a free-wheeling discussion with Canadian reporters, Brinkmann suggested that most other issues in the four-year talks have been resolved or are close to being resolved, and that two specific sticking points how much Canadian beef to Europe and how much European cheese to Canada is keeping the sides from a deal.

"I think we have the landing zones identified for all sectors ... but like in most negotiations it's agriculture which is the most difficult one," he said.

"Canada wants to export beef to the European Union and wants better market access, but the European Union wants also better market access for dairy products, cheeses and yogurt and so on. The beef sector is protected in the European Union and dairy products in protected in Canada, so there has to be a certain give and take."

Specifically, Brinkmann said the EU has offered to allow the minimum quantity Canadian beef producers say would be required to justify separate streams of hormone and antibiotics-free cattle 40,000 tons a year and even beyond that number, but Canada has demanded more.

"We are ready to deliver that and even go beyond that, but there's a certain limit which we can't go above," he said, because European producers such as Ireland and France would not agree. "It would be suicidal for them to accept things which would wipe out (their industry)."

He added that the quota the EU can accept from Canada is further affected by Europe's desire to negotiate a free trade pact with the United States, which will also want to ship beef into the continent.

In return, Brinkmann said the EU has not asked Canada to change its controversial supply management system which protects Canadian dairy and poultry farmers, but is insisting that Canada accept more imports of dairy products, especially cheese. He would not name a specific number.

"It doesn't have to be same amount we give in beef, but there must be some kind of correlation," he said.

'Small handful of issues' remain

Reacting to the comments, Canadian Trade Minister Ed Fast agreed the two sides are close to a deal, but would not discuss the specific issues or agriculture quotas being discussed.

"I can tell you with absolute confidence that each day our negotiators met this week, they made significant progress inbridging the remaining gaps," he said, adding there are a "very small handful of issues" to be resolved.

Aside from agriculture, the two sides have named country of origin rules for autos how much Canadian content must be in exports of North American vehicles provincial government procurement limits, drug patent protection that could potentially increase drug costs in Canada, and "geographical indications," the ability to claim exclusivity for products named after regions, as issues still on the table.

But Brinkmann, who said he has participated in some of the discussions, said the two sides essentially know the meeting place on those issues. Agriculture, however, is proving a harder nut to crack, although he said he was hopeful of a deal by the summer.

Observers have speculated that Canada needs to hammer home an agreement soon or risk a distracted Europe turning its attention to bigger fish, free trade deals with the United States and Japan.

Fast disagreed, but Brinkmann noted the EU chief negotiator on the Canada file is already starting to work on the Japanese talks.

Fuel directive dispute continues

Brinkmann also said Europe was taken back by the warning this week from Natural Resources Minister Joe Oliver that Ottawa is prepared to launch a trade action against the 27-country bloc over plans to designate oilsands crude as dirty oil.

Oliver has been in Paris, Brussels and London this week, lobbying against the EU's proposed fuel directive legislation.

Brinkmann noted that the new quality directive implementation rules have yet to be adopted, adding any measure will be "non-discriminatory and science based and will stand the test at the WTO (World Trade Organization)."

It is up to oil exporting countries, including Canada, to meet limits on greenhouse gas emission targets European determines appropriate for their market, he said.

"So we are not prohibiting the import of Canadian oil derived from bitumen, or any oil derived from coal. It's up to the operators to get the mix right to get this level," he said.

Oliver told a London audience Thursday that Canada "will take action if there are no substantive changes in the fuel quality directive." But in other comments this week, the minister characterized WTO action as a "last resort kind of strategy" if the lobbying doesn't result in "improvements."

Both Brinkmann and Fast agree the side dispute should not impact the free trade negotiations, however, saying they are on a separate track.

Oliver too has made it clear that differences over thefuel directiveare separate from the ongoing trade deal talks.

If a trade deal is reached, Brinkmann estimated it would take the EU nations about two years to ratify.

Whilethe Conservativemajority government virtually ensures Canada's ratification, the same cannot be said ofratification on the EU side. Depending on what's in the final text, individual countries may need to sign off on the deal as well, if it impacts matters of their national jurisdiction.

A vigorous debate among environmental and civil society groups could influence the votes of EU legislators, as it did when the Anti-Counterfeiting Trade Agreement was defeated in a surprise vote last July.