Reports Suggest Free Trade Deal with European Union May Be Over-Hyped

By Beltrame, Julian | The Canadian Press, November 6, 2013 | Go to article overview

Reports Suggest Free Trade Deal with European Union May Be Over-Hyped


Beltrame, Julian, The Canadian Press


CETA impacts on Canada 'modest': reports

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OTTAWA - Two new independent reports are playing down the benefits of the recently concluded free trade deal with Europe, casting doubts on the Harper government's contention that it is key to Canada's economic prosperity.

The reports from Capital Economics and, most recently, the Royal Bank, predict the agreement, called CETA, will be a net benefit for Canada but that the gains are still too early to determine, or will be modest.

"It's political so there's lots of hype around the deal," said David Madani, chief economist with the private-sector research firm Capital Economics in Toronto.

"Most people understand that Canada's trade with the EU (European Union) is small so it's not going to have a huge benefit. Assuming it is ratified, it'll benefit Canada but the benefit will be very small."

The government continues to quote a joint study on the impact, conducted five years ago, projecting a possible $12 billion boost to economic activity in Canada -- $16 billion for the EU -- and the creation of about 80,000 jobs.

In a response, a spokesman for Trade Minister Ed Fast said that, if anything, the joint study underestimated the gains.

"We believe that it's the current numbers that are modest, and that the benefits of expanding the export opportunities for Canadian businesses with this preferential access to the lucrative European Union market will be even more widespread," said Rudy Husny, Fast's press secretary.

RBC economist Laura Cooper says it is difficult to verify the claims, given the lack of details in what has been announced.

She concludes, in a five-page analysis issued to clients on Wednesday, that while there are potential benefits for the economy down the road, "there will be little noticeable economic impact for Canada over the short-term."

A big reason for tempering expectations, say the reports, is that current trade volumes between Canada and the EU are modest. In 2012, Canadian exports totalled about $463 billion, but only $41 billion went to the EU, so even a 20 per cent boost to the volume will be a modest increase in the overall economies of both.

As well, several key sectors may not be able to realize large gains from the deal, the reports say.

For instance, RBC points out that 45 per cent of Canadian exports to the European Union last year were related to resources. …

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