Newfoundland and Labrador Premier Kathy Dunderdale says Ottawa is pressuring her to drop provincial fish processing regulations to help secure a trade deal with Europe.

In a speech to the St. John's Board of Trade on Monday, Dunderdale revealed that the issue even came up at the last minute as the province and the federal government tried to finalize a loan guarantee for the Muskrat Falls hydroelectric project.

"You want to know what the racket was about on November 29th? It was about the fishery," Dunderdale told board of trade members.

Dunderdale said Prime Minister Stephen Harper and his staff have raised the issue many times, repeatedly urging her to scrap minimum fish processing requirements because the Europeans are demanding it.

The premier said when Harper brought it up during the final hours of talks on Muskrat Falls, it almost killed the deal.

"And you know what I told him to do with the loan guarantee? 'No quid pro quos. You promised it to the people of the province. You said that the only requirement was that it have a sound business plan. Well, we've produced it. You give us the loan guarantee and don't talk to me about the fishery at the 11th hour,' " Dunderdale said she told the prime minister.

European pressure

Provincial regulations dictate that fish landed in Newfoundland and Labrador must be processed in the province, in the interest of protecting jobs for local plant workers.

But Dunderdale said those regulations are a sticking point in trade talks between Canada and Europe, because the Europeans want a free market on Canadian fish, no matter where the catch is landed.

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N.L. requires that all fish landed in this province be processed at local fish plants, such as this one. (CBC )

Speaking with reporters after her speech on Monday, Dunderdale confirmed Harper has told her the Europeans consider dropping the minimum processing requirement to be extremely important in trade negotiations.

Dunderdale said she might consider the request if the local industry and province can benefit from it.

But so far, she said her advisors have told her it makes little sense for Newfoundland and Labrador's fishing industry. 

The premier said she has a provincial representative in Brussels, where the Canada-European trade talks are taking place.