Chase Ferguson Daniel Preece PSCI 3606B February 26, 2013 Policy Memo RE: Comprehensive Economic and

Trade Agreement (CETA) with the European Union Introduction: This memo concerns the current policy of the Government of Canada in regards to the free-trade negotiations with the European Union also known as the Comprehensive Economic and Trade Agreement (CETA). The issue of trade with the European Union is of huge importance to the Canadian economy as the EU represents the largest single market in the world economy. According to Statistics Canada the EU is also the second largest source of foreign direct investment in Canada after the United States. The current Conservative government has made free trade negotiations with the EU a top priority since 2009 and hopes to push through an agreement early in 2013. Based on a number of issues CETA poses to many areas of Canadian society this analyst recommends the government of Canada cease negotiating the agreement for the time being in order to redefine Canadian positions in respect to several specific issues. This recommendation is based on extensive background research, the details of which can be found in the attached literature review on the subject. Criteria: The following policies are evaluated based on the economic feasibility, political feasibility, and environmental impact that CETA will have on Canada at both the local and national levels. It is through these frameworks that alternative policies will be crafted.

Background Literature Review Trade and strong relations between Canada and Europe has been a historically important element of the Canadian economy going back long before Confederation. This relationship throughout history is detailed in Crossing the Atlantic: Comparing the European Union and Canada edited by Patrick Crowley. The work details the long and complex development of political and economic ties between Canada and the Europe, especially since the end of the Second World War. The desire for more trade with Europe and later the EU has developed gradually as concern of dependency on the United States has grown. This concern would grow as Britains influence in Canadas economy shrank. The governments 1970 review of external policy, Foreign Policy for Canadians, called for increased ties to Europe to create a more healthy balance within the North Atlantic community and to reinforce Canadian independence (Crowley et al. 2004.). This apparent desire for a healthy balance in Canadas trade relationships with other countries seems to be a repeated goal of the federal government even as trade with the United States has grown enormously, especially since the signing of the CanadaU.S. FTA. As the work continues to explore, Canadas central arguments for increased trade with the European Community of the 1970s remains very similar to ones used in current negotiations. Some major aspects of this include: Canadas position as a stable long-term supplier of natural resources, especially energy, in the face of growing international scarcity. Both Canada and Europe will benefit from a more liberalized trading order. Diversification is not meant to be anti-American in nature but to expand trade with Europe while simultaneously maintain strong trade ties with the U.S.

(Crowley et al. 2004.) Crossing the Atlantic does an effective job of illustrating the forces that bring Canada and the EU together out of desire and necessity for closer economic ties. This desire has only been reinforced in the past five years as recession in the United States simultaneously dragged down the Canadian economy. In Images of Canadianness: Visions on Canada's Politics, Culture, Economics, Balthazar and Haenens (1998) illustrate the growing talks of free trade across the Atlantic Ocean in the 1990s. The authors speculate of the Transatlantic Free Trade Agreement (TAFTA) that would connect NAFTA to the EU, something the world is far closer to in 2013 with the U.S. and EU planning to begin trade negotiations. The authors argue the political gains of TAFTA would likely outweigh the economics ones and again highlight concerns that still exist in 2013. Balthazar and Haenens (1998) like many in the post-Cold War era see free trade across the Atlantic as an inevitable step to the global process of trade liberalization. The authors were right in predicting that real negotiations for free trade would not being until the economy declined. Writing from the 1990s: The second problem a TAFTA faces has to do with the current economic climate. In a boom cycle such as much of the world is enjoying now, there is little incentive to alter any of the existing political structures (Balthazar and Haenens 1998). In the slow recovery climate of todays global economy new trade expansions and structures sound much more promising to the governments desperate to get economies moving again. Together these first two sources help to clarify the shifting attitudes and policies of Canadian-European trade over the past 50 years. The trend has undoubtedly been towards stronger ties and a fairly consistent desire to decrease dependency on the United States through diversification.

One work detailing potential problems of Canada-EU trade agreement was written well before the current negotiations started. A Canada-EU FTA is an Awful Idea was published in Policy Options magazine in the summer of 2002. The work looks at more broad issues regarding free trade with the EU as opposed to specifics. The authors cite the natural north-south economy that has developed in North America as well as Canadian preference for American products over European ones as potential threats to the economic feasibility of a FTA with Europe (Dymond & Hart 2002). These realities orient Canada as a nation of the Americas that operates economically within that sphere. Dymond & Hart (2002) have three requirements for a Canada-EU FTA that is economically feasible: First, it would have to provide Canada with equal or better market access to Europe then is already provided through NAFTA to the United States. Second, the benefits of the deal would have to be large enough to overcome opposition from well-entrenched interests in the European economy. Third, any FTA would not harm the existing trade relationship with the United States or any other country. The article goes on to list implications of a Canada-EU FTA that would become problems in negotiations, some of which have proven to be accurate based on concerns with current negotiations. Some of these concerns include changes to copyright laws, the ability of municipal governments to buy local, and also the possibility of overlapping trade preferences between those that already exist with the United States and those that would exist with the EU. In Europe, Canada and the Comprehensive Economic Partnership Agreement some of the opposition to CETA is explored along with more specific problems found in negotiations.

The book starts by recognizing CETA as more than just another free-trade agreement between two economies but as the foundation of a unique transatlantic agreement. The authors argue: As CETA is much more than a simple free trade agreement, its breadth covers regulatory aspects in goods, services, and finance; the opening of public procurement markets; attitudes and policies of Canadian provinces towards liberalization; climate policies and international leadership claims of the EU in comparison to Canadian policy attempts; the challenges of the Euro project and the reform efforts; and the challenges of the Euro as an international reserve currency ( bner et al. 2011) The unprecedented nature of such an agreement leads to many concerns on both sides of the negotiations. The attitude towards procurement at the local government level has led to more than 30 municipalities across Canada to pass motions claiming exemptions from any CETA provisions that affect their ability to buy local. On the EU side, concern has been raised on the environmental standards of the Alberta oil sands as well as Canadian beef standards in respect to Mad Cow disease ( bner et al. 2011). The authors go on to conclude that the net benefit bner et al. 2011 .

analysis of CETA will be mixed at best from the Canadian perspective (

Bibliography Balthazar, Louis, and L.D. Haenens.Images of Canadianness: Visions on Canada's Politics, Culture, Economics. Ottawa: University of Ottawa Press, 1998. Crowley, Patrick et al. Crossing the Atlantic: comparing the European Union and Canada. Aldershot, England: Ashgate, 2004. Dymond, William, and Michael Hart . "A Canada-EU FTA is an Awful Idea." Policy Options, July 2002. http://www.irpp.org/po/archive/jul02/dymond.pdf (accessed February 24, 2013). bner, urt. Europe, Canada and the Comprehensive Economic Partnership Agreement. New York : Taylor & Francis, 2011.