Canada and the European Union have signed a tentative deal to open markets and drop nearly all import taxes on everything from food to cars. 

Under the Comprehensive Economic Trade Agreement (CETA) and NAFTA, Canada will have preferential access to more than half of the world’s economy. 

The agreement in principle also provides for working groups to look at non-tariff barriers — regulations on health and sanitation, for example — that interfere with trade.

The sweeping free trade deal with the 28-member European Union — which has a total population of 500 million and generates $17 trillion in annual economic activity — covers everything from cars to food to intellectual property.

"This is a big deal. Indeed, this is the biggest deal our country has ever made," Prime Minister Stephen Harper said in Brussels on Friday after signing the agreement alongside European Commission president Jose Manual Barroso. "This is a historic win for Canada."

Harper Barroso EU trade deal

The document Prime Minister Stephen Harper signed in Brussels on Friday, alongside European Commission president Jose Manual Barroso, is an agreement in principle. Full ratification is likely two years away. (Francois Lenoir/Reuters)

Harper said the deal will increase the number of countries in free-trade agreements with Canada from 14 to 42. According to a joint study, bilateral trade will increase by an estimated 20 per cent, add a $12-billion boost to the Canadian economy and create 80,000 new jobs. 

"Equally important, Canadian families will have greater access to European goods at a lower cost, as 98 per cent of tariffs, both ways, will be removed immediately," he said. 

Key aspects of deal

Barroso said the deal will be a landmark trade achievement and a stepping stone to an integrated transatlantic market.

"With this agreement we are also sending an important and positive signal around the world: to markets, to businesses, our trading partners and of course the millions of people across Europe, but also, I believe, across Canada, that are looking for growth and in Europe especially, for a renewed economic drive," Barroso said. 

Highlights from the agreement include:

  • Canadian automakers will be able to export 100,000 cars a year, 12 times their limit now.
  • Full access to EU markets for Canadian fresh and frozen fruit and vegetables, or processed foods.
  • Full access to EU markets for Canadian wheat, oats, barley, rye and canola oil.
  • Full access to EU markets for Canadian dairy farmers, with both sides excluding poultry and egg sectors.
  • No more tariffs for many seafood products, including cooked and peeled shrimp, live lobster, frozen lobster and frozen scallops.
  • No more tariffs on metals and mineral products, including iron and steel.
  • Canada will allow 29,000 tonnes of tariff-free cheese from the EU, up from 13,000 tonnes.
  • The government is considering compensation for Canadian dairy farmers if they lose money because of the agreement. It’s not clear whether compensation is being considered for small cheesemakers.
  • Canadian beef producers will be able to sell an additional 50,000 tonnes of beef – the current quota is 15,000 tonnes.
  • Canadian pork producers will be able to export 75,000 tonnes, a substantial increase to their current 6,000 tonne quota.
  • The government is also talking to the provinces and territories about compensation if the provision to extend drug patents by two years increases their costs. Patents would be extended only if there were delays in the drug approval process.
  • It’s not clear what the cost will be to the government of losing all the revenue it earns off tariffs on European products – for example, a six-per cent tariff on luxury vehicles.
  • No more tariffs on European wine and spirits entering Canada.

The EU highlighted the wine and spirits measure in a background note provided to the media by European officials.

"Wines and spirits deserve a special consideration within the [prepared agricultural products] group for their particular export relevance," it said, noting the EU is the source of half of Canada's wine imports.

"The tariff elimination here is complemented by the removal of other relevant trade barriers which will significantly improve access to the Canadian market for European Wines and Spirits," it added.

Reporters in Ottawa were provided with briefing notes and access to officials, but told nothing could be attributed to them and must be written into reports without quotes. A television link to Brussels was set up to watch the news conference with Harper and Barroso, during which reporters travelling with Harper could ask questions.

Talks not yet complete wrapped

But Friday's announcement came with a caveat: The negotiations aren’t yet done.

Some areas of the agreement still need drafting, while others need fine-tuning, reporters learned through a briefing. But the most contentious points have been settled. The agreement text then has to be drafted, run past lawyers and translated into 24 languages for the 28 EU countries to examine.

The document Harper and Barroso signed Friday is an agreement in principle and full ratification is likely two years away.

The agreement comes five years after negotiations started, and nearly one year after the deal was supposed to be done. Other countries have been watching the process, which is unique because both sides had to list the sectors they wanted excluded from the talks.

Trade talks are typically done the other way around, with both sides listing sectors that are up for talks. Officials have long emphasized that the Canada-EU approach would lead to a more sweeping agreement.

Stakeholders from the meat and meat-packing industries, as well as exporters, say they're thrilled with the result.

Dairy farmers and cheese producers, however, have been less enthusiastic. They expressed concern over the deal earlier this week, particularly the provisions increasing imports of EU cheese, saying it could threaten jobs and industries in Canada.  

Speaking in Brussels, Harper said the system of supply management that supports the dairy industry is protected.

"For the dairy industry specifically, they gain virtually unfettered access to the European market," he said, though he allowed that cheese producers may see "some small and transitory negative effects in the years to come."

U.S., EU have started talks on similar deal

Negotiators built in exclusions for public health care, public education, social services and culture. They also preserved the right of regional governments to prefer local service providers.

But an important provision in the deal ties Canada’s fortunes to those of other countries negotiating trade deals: If any country negotiates a better deal, those provisions will apply to Canada automatically. The EU and the U.S. have recently started their own set of talks for a similar-style agreement.

Investments will still be subject to the net benefit test, which allows cabinet to review takeovers above a certain value.  

Negotiators also built in incentive for automakers to invest in Canada: tariff-free access for cars that are 50 per cent Canadian-built, on top of the 100,000 quota.

Europeans are said to be excited about the prospect of opening up the Canadian market to more luxury goods like textiles, clothing and perfume.