UPDATE 3-Say cheese: EU strikes trade deal with Canada, looks to U.S.

Reuters

(Corrects to North American Free Trade Agreement in paragraph11)

* EU, Canada finally close talks launched in May 2009

* Deal is Europe's first with a G8 economy

* EU hopes to use it as stepping stone to pact with U.S.

By Robin Emmott and Philip Blenkinsop

BRUSSELS/LUXEMBOURG, Oct 18 (Reuters) - The European Unionand Canada agreed a multi-billion-dollar trade pact that willintegrate two of the world's largest economies and paves the wayfor Europe to clinch an even bigger deal with the United States.

Talks were launched in May 2009 but stalled for months overquotas for Canadian beef and EU cheese. Canadian Prime MinisterStephen Harper and European Commission President Jose ManuelBarroso met in Brussels on Friday to resolve outstanding issues.

In a cheeky touch, chefs served Italian gorgonzola and Greekfeta cheese at a four-course lunch laid on for the two leadersto celebrate the EU's first trade deal with a member of theGroup of Eight biggest world economies.

"This agreement is a landmark achievement for thetransatlantic market," Barroso told a news conference, flankedby Harper. "With political will and a good dose of hard work,there is a way to reach a result that benefits people on bothsides of the Atlantic," he said.

EU trade chief Karel De Gucht called the Canada accord a"template" for Europe's negotiations with the United States.

The deal marks a breakthrough for Brussels' free-tradeagenda, which had previously achieved smaller agreements withSouth Korea and Singapore. It is expected to increase bilateraltrade in goods and services by a fifth to 25.7 billion euros($35 billion) a year, according to the latest EU estimates.

Barroso said he hoped the agreement could come into effectfrom 2015, after EU governments, the European Parliament and theCanadian provinces give their blessing.

However, France signalled some reservations about an influxof Canadian beef under the deal, even if its Munster andCamembert cheese will now fill shelves in Canada's supermarkets.

"I am waiting for confirmation from the Commission that thisaccord, particularly in agriculture, does not a set a precedentfor talks with the United States," said French Trade MinisterNicole Bricq at a meeting with De Gucht and her peers inLuxembourg.

For Canada, the deal will make it the only G8 country - andone of the only developed nations anywhere - to havepreferential access to the world's two largest markets, the EUand the United States, home to a total of 800 million people.

"This is the biggest deal our country has ever made," Harpersaid, adding that it outstripped the North American Free TradeAgreement between Canada, the United States and Mexico.

'OUTRAGEOUS' BEEF DEAL

The Commission is negotiating trade pacts with more than 80countries on behalf of the bloc's 28 members, following thecollapse of the marathon Doha round of global trade talks. Thedelays that dogged the Canada agreement showed how difficultsuch deals can be.

European efforts to sign a free trade accord with the UnitedStates faced a setback this month when a second round ofnegotiations was cancelled because of the U.S. governmentshutdown.

Despite plans to do a deal by the end of next year, thetalks have also been overshadowed by reports the United Statesbugged EU offices under surveillance programmes made public byfugitive former intelligence contractor Edward Snowden.

Still, the Canada agreement should provide a boost forEU-U.S. negotiations. Both deals seek to go far beyond tariffcuts and to reduce transatlantic barriers to business. There arealso similar sticking points, such as agriculture.

"It's a good signal. I'm a transatlanticist," German EconomyMinister Philipp Roesler told Reuters in Luxembourg.

"It's a great basis for all other negotiations, such as theTTIP talks with the United States," he said, referring to theproposed deal by its formal name, the Transatlantic Trade andInvestment Partnership.

The EU-Canada pact would eliminate tariffs on almost allgoods and services, set larger quotas for EU dairy exports andmake it easier for EU carmakers to export vehicles to Canada.

For the first time, provincial governments in Canada willcommit to opening their lucrative procurement markets to allowEuropean companies to compete for contracts alongside locals.

The EU will eliminate duties on a range of Canadianagricultural products, from wheat to maple syrup. Canada will beable to export 80,000 tonnes of pork and 50,000 tonnes of beeffree of duties to the European Union.

But French beef farmers said they were "outraged". "Worst ofall, the (European) Commission is blindly preparing for a dealwith the United States that will hasten the bankruptcy of farmsand jobs in the sector," France's beef farm federation FNB said. (Additional reporting by Luke Baker in Brussels and IngridMelander in Paris; editing by Tom Pfeiffer)

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