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

Reuters

* 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 multibillion-dollar trade pact on Fridaythat will integrate two of the world's largest economies andpave the way for Europe to clinch an even bigger deal with theUnited States.

The deal will make Canada the only G8 country 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,"Canadian Prime Minister Stephen Harper said in Brussels, addingthat it outstripped the North American Free Trade Agreementbetween Canada, the United States and Mexico.

Talks between the two sides launched in May 2009 but stalledfor months over quotas for Canadian beef and EU cheese. Harperand European Commission President Jose Manuel Barroso met inBrussels to resolve outstanding issues and seal the deal.

In a cheeky touch, chefs served Italian gorgonzola and Greekfeta cheese at a four-course lunch laid on for the two leadersto celebrate the deal, which EU trade chief Karel De Guchtcalled a "template" for negotiations with the United States.

BREAKTHROUGH DEAL

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 andCanada's 10 provinces give their blessing.

One significant potential obstacle was cleared on Fridaywhen the government of Quebec, whose dairy industry had beenunhappy about the increased EU cheese quota, announced itssupport for the agreement.

On dairy, the province's government said Ottawa hadcommitted to compensate producers for any losses due to the newimport quotas.

However, France signalled some reservations about an influxof Canadian beef under the deal, even if its Munster andCamembert cheese will now win easier access to Canada'ssupermarket shelves.

"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.

The Commission is negotiating trade pacts with more than 80countries on behalf of the bloc's 28 members after the collapseof the marathon Doha round of global trade talks. The delaysthat dogged the agreement with Canada showed how difficult suchdeals can be.

Efforts to sign a free trade accord with the United Statesfaced a setback this month when a second round of negotiationswas cancelled because of the U.S. government shutdown.

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 byformer U.S. intelligence contractor Edward Snowden, who hastaken refuge in Russia.

Still, the EU-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 aresimilar 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.

TARIFFS AND QUOTAS

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 andfor European companies to invest in Canada's uranium sector.

For Canada, pork and beef farmers are perhaps the biggestwinners, gaining a bigger share of a huge market once theychange production and processing to meet EU rules.

But more European cheese will enter Canada's well-protectedmarket, and for the first time, provincial and municipalgovernments in Canada will commit to opening their lucrativeprocurement markets so European companies can compete forcontracts alongside locals.

"When you open that up to the European behemoths likeSiemens and others, I think it's going to change thelandscape," said John Boscariol, who heads the internationaltrade and investment law group at McCarthy Tetrault in Toronto.

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 EU.

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.

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