CANADA SHOULD GO BIG IN TRADE NEGOTIATIONS WITH EUROPEAN UNION

OTTAWA, Sept. 20 /CNW/ -The stakes are higher than commonly assumed in Canada's trade negotiations with the European Union (EU), the Conference Board argues in a ground-breaking report that assesses a fuller range of Canada-EU trade than do conventional analyses.

"Canadian and European Union negotiators have made rapid progress towards a trade and investment agreement in just a year and a half. But conventional trade analysis paints a narrow picture of our trade relationship, and a defensive stance dominates public discussion about the deal. The entire agreement could fall apart if this narrow approach prevails, costing us better access to a broad range of long-term economic opportunities," said Danielle Goldfarb, Associate Director, International Trade and Investment Centre.

"Canada can frame its position more constructively in light of global business realities. We have much to gain from two-way investment, two way services trade, two-way digital trade, two-way value chain activity, and other partnerships with the EU over the long term."

Research in Motion (RIM)— maker of the BlackBerry, one of Canada's few global brands —illustrates the reality of highly-integrated global trade. Developed in Canada, the components in the Blackberry come from suppliers all over the world. RIM manufactures its new models in Canada, then outsources the manufacturing to lower-cost countries, such as Hungary. Moreover, the BlackBerry's value goes beyond its components and manufacturing—the data and voice services customers buy in the EU and worldwide represent a substantial proportion of company revenues. This broader range of activities that enable RIM to compete globally is excluded from typical trade analysis and measures.

The Conference Board's analysis, published in Canada's "Missing" Trade with the European Union, goes beyond the traditional trade analyses, which focuses primarily on exports of goods. The "integrative trade" concept includes services trade, global and regional value chains including imported parts, investment and sales by foreign affiliates, digital or virtual trade, and linkages between goods and services. These forms of trade are undercounted in traditional measures.

When traded services, imported parts, and sales by Canadian affiliates in the EU are included, Canada sells at least $150 billion goods and services to the EU every year - more than four times the size of the $35 billion in reported goods product exports. EU sales of goods and services to Canada were even more substantial -$440 billion in 2008, compared to $70 billion in conventionally measured imports.

In fact, the primary mode of Canada-EU trade is not cross-border exports, but sales by foreign affiliates. And, contrary to assumptions, Canada-EU services trade is central and substantial, not marginal.

The study finds that companies in the EU and Canada not only sell each other final products, they also make important contributions to each others' supply chains, maintaining competitiveness through the exchange of raw materials, parts, and services. In contrast to Canada-US supply chains, there is greater growth potential in the Canada-EU supply chain relationship.

Ottawa and the provinces (who are also at the EU negotiating table) must therefore give Canada's negotiators a broad mandate that goes beyond obtaining greater access for Canadian products in the EU. This includes prioritizing the removal of barriers to two-way Canada-EU services trade (such as facilitating temporary work visas), increasing access to two-way investment, and removing barriers to inputs that help Canada and the EU improve their supply chain competitiveness.  

The report is  produced for The Conference Board of Canada's International Trade and Investment Centre, which is intended to help Canadian leaders better understand what global economic dynamics could mean for public policies and business strategies.

For further information:

Brent Dowdall, Media Relations, Tel.: [phone] ext.  448
E-mail: [email protected]