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### Viewing cable 08OTTAWA1257,

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08OTTAWA1257 | 2008-09-22 12:45 | 2011-04-28 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Ottawa

`

    VZCZCXRO8231
    PP RUEHGA RUEHHA RUEHMT RUEHQU RUEHVC
    DE RUEHOT #1257/01 2661245
    ZNR UUUUU ZZH
    P 221245Z SEP 08
    FM AMEMBASSY OTTAWA
    TO RUEHC/SECSTATE WASHDC PRIORITY 8530
    INFO RUCPDOC/USDOC WASHDC
    RUEHBS/USEU BRUSSELS 0639
    RUEHFR/AMEMBASSY PARIS 1022
    RUCNCAN/ALL CANADIAN POSTS COLLECTIVE

` `

    UNCLAS SECTION 01 OF 02 OTTAWA 001257

    SIPDIS

    SENSITIVE

    STATE FOR WHA/CAN, EEB/DCT

    COMMERCE FOR 4310/MAC/ONA

    E.O. 12958: N/A
    TAGS: ETRD ECON EAGR EIND EFIN ELAB CA EU
    SUBJ: Canada-EU trade proposal may rival scope of NAFTA...or not.

    Sensitive but Unclassified, please protect accordingly. Not for
    internet distribution

    ¶1.  (SBU) Summary:  Canada and the European Union will review a
    joint study on the benefits of removing mutual trade barriers at the
    October 17 Canada-EU Summit in Montreal.   While senior Canadian
    trade officials have publicly touted the benefits of a potential
    Free Trade Agreement (FTA) - and press reports suggest arriving at
    such a deal might be a mere formality - the EU has been more
    cautious, suggesting that the hard work is yet to commence.  Closer
    trade ties to Europe have often been among Canadians' favorite
    responses to anxiety about U.S. economic influence here, which
    perhaps helps explain the lofty hopes expressed by Canadian
    officials so far.  End summary

    ¶2.  (SBU) For several years now, Canada has expressed interest in a
    wider FTA-type agreement with the European Union (EU).  At the
    Canada-EU Summit in June 2007, Canada and the EU agreed to undertake
    a Joint Study to examine the existing barriers - especially
    non-tariff barriers - to the flow of goods, services and capital
    between the EU and Canada, and to estimate the potential benefits of
    removing such barriers.  The results of that Joint Study are
    expected to be released between October 14 (voting day in the
    Canadian federal election campaign) and October 17 (the scheduled
    date of the 2008 Canada-EU Summit).  We understand that the EU wants
    to send a clear signal at the summit that it wants closer economic
    ties with Canada and that the two parties should start examining in
    depth the elements of - and possible obstacles to - a comprehensive
    trade and investment Agreement. But the EU also acknowledges that
    engagement in a new negotiation will depend on a challenge-filled
    preparatory phase to address issues which have been controversial in
    the past, such as the protection of geographical indications of
    European products or the commitment of the Canadian Provinces to
    allow Europeans access to their procurement activities.

    ¶3. (SBU) Given the proximity of the dates for Canada's federal
    election and the Canada-EU Summit, we asked our interlocutors to
    gauge the likelihood that the Summit could be postponed. We were
    told that postponement is unlikely since Canada is hosting the
    twelfth "Sommet de la Francophonie" in Quebec City from October 17 -
    19, which French President Sarkozy will attend (along with the heads
    of government and state from 55 francophone nations).  Also, we
    understand that the Czech Republic, which assumes the EU Presidency
    from France in January 2009, is skeptical of the value of an
    EU-Canada FTA.  Therefore, if negotiations are to receive a timely
    green-light, it would have to happen at this Canada-EU Summit.

    ¶4. (SBU) In comments reported on September 19in the Canadian press,
    Canada's Deputy Minister of International Trade, Marie-Lucie Morin,
    indicated that the potential FTA would be broad and deep and could
    even lead even to a labor mobility pact and liberalization of the
    bilateral investment regime.   We have heard from several EU
    sources, however, that the EU is somewhat more cautious given the
    failed negotiations during 2005 - 2006 of the EU-Canada Trade and
    Investment Enhancement Agreement.  We have heard also that there are
    mixed feelings among a number of EU members states, not just the
    Czechs, about the value of this effort.

    ¶5. (SBU) Comment:  The proposed Canada-EU FTA is a safer political
    Q5. (SBU) Comment:  The proposed Canada-EU FTA is a safer political
    sell in Canada than most FTA proposals.  Closer trade ties to Europe
    have often been Canadians' favorite response to anxiety about U.S.
    economic influence here, which may help explain the lofty hopes
    expressed by Canadian officials so far.  End comment.

    The Background
    ---------------------

    ¶6. (U) Canada is the EU's 11th most important trade partner,
    accounting for 1.8 percent of total EU external trade.  For Canada,
    the EU is the second most important trade partner, after the United
    States, with a 9.6 percent share of Canada's total external trade.
    The value of EU-Canada trade in goods rose to about USD$70 billon in
    2007, with high value-added products such as machinery, transport
    equipment and chemicals making up around half of the EU's exports to
    Canada and 32 percent of the EU's imports from Canada.  An
    additional 15 percent of bilateral trade consists of agricultural-
    or energy-related products. Trade in services, particularly travel
    and transportation, is a growing area in the trade relationship.
    Investment, too, is a particularly strong feature, with the EU
    ranking as the second largest investor in Canada, and Canada as the
    third investor in the EU.  Figures below are conversion of Euro
    values to US dollar at current market rates.

    Trade in goods --

    OTTAWA 00001257  002 OF 002

    EU exports of goods to Canada in 2007:  US$37 billion
    EU imports of goods from Canada in 2007:  US$33 billion

    (EU Canada goods trade is dominated by high-value goods such as
    machinery, transport equipment and chemicals.)

    Trade in services --

    EU exports of services to Canada in 2007:  US$14 billion
    EU imports of services exports from Canada in 2007:  US$11 billion

    Foreign Direct Investment -

    EU inward investment in Canada in 2006:  US$183 billion
    Canadian inward investment in the EU in 2006:  US$121 billion

    ¶7. (U) In 1976, Canada and the EU signed the first-ever Framework
    Agreement for Commercial and Economic Cooperation between the EU and
    an industrialized country.  For over 30 years this Framework
    Agreement has provided the foundation and the structure for the
    management and development of the EU-Canada relationship in an
    increasing number of fields, including trade. The 1990 Transatlantic
    Declaration built on this confirming the goal shared by Canada and
    the EU of strengthening the multilateral trading system.  Canada and
    the EU began negotiations on a Transatlantic Aviation Agreement in
    ¶2007.

    ¶8. (U) The EU and Canada meet in annual EU-Canada summits, at which
    the issues of greatest importance to the relationship, including
    trade issues, are discussed.  In addition, senior European
    Commission and Canadian Federal Government officials, in the
    presence of representatives of the Canadian provinces and of the EU
    Member States, meet once a year in the Joint Cooperation Committee
    (JCC) to review the full range of issues relating to EU-Canada
    economic and trade relations.

    Wilkins

`