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EU denounces trade ‘barriers’; Canadian examples highlight dangers of CETA

Since the economic crisis hit two years ago, and the G20 promised not to raise trade barriers, the EU has put out a series of finger-pointing reports attacking government measures they feel offend the formal pledge. “The danger of mounting non-tariff barriers, in particular in the area of government procurement, as well as import and export tariff increases, remains present,” says the EU’s latest report, out today. “It is thus likely that there will be a lasting impact on EU trade flows, even after the crisis.” Sections on Canada are informative of the kinds of ‘behind the border’ rules and laws EU negotiators are trying to dismantle in the CETA negotiations.

Search ‘Canada’ in the EU report and you’ll pull up the following examples of trade ‘barriers’:

• Ontario Province introduced sales targets for various wines. Wines sold in the stores of the Liquor Board of Ontario (LCBO) below these thresholds can be de-listed. Thresholds for Ontario wines are set at a substantially lower level than imported wines, despite higher sales volumes in the LCBO stores. These net thresholds can be considered as a possible barrier to trade. This measure is effective as of 20 July 2009.

• On 29 January 2009 the Government of Canada announced that it would provide CAD175 million “on a cash basis” to the Canadian Coast Guard for the purchase of new vessels and improvements to existing vessels. The allocated funds are included as part of Budget 2009’s provisions for infrastructure renewal. Although the Government had yet to award the contracts when the Budget was announced, it clearly stated that “work will be conducted in Canada, and where possible, by shipyards located within the regions of the vessels’ home-ports”. The Budget foresees acquisition of 60 small craft, 30 environmental response vessels, five life boats and two inland scientific research craft.

• Proposed decision on domestic content in Ontario’s Green Energy Act and Feed in Tariff (FIT) program. It is expected that the Ontario government will be finalizing a decision on domestic content at a cabinet meeting within weeks. Feedback from the Ministry of Energy and Infrastructure (MEI), CanWEA and the draft FIT rules indicate that domestic content will be based on ‘soft costs plus’, a percentage of the project’s total capital expenditure (i.e. balance of plant) and Major Equipment (nacelles, blades & towers). The total percentage has yet to be released, however, it is expected to be between 20-40%.

• Canadian government announced initiatives that could possibly introduce subsidies to various industries. For the automotive industry there is an offer of short-term repayable loans to the industry; creation of a $12 billion credit facility to support vehicle and equipment financing; $170 million over two years to support innovation and marketing for the forestry sector; $500 million over five years to facilitate new agricultural initiatives; $50 million over three years to strengthen slaughterhouse capacity; as well as measures to enhance the resources and scope of action available to Export Development Canada (EDC).

• Canada decided to provide a subsidy to Bombardier, a Canadian aircraft manufacturer, in the form of repayable loans of up to CAN $173 million. This support, although formally in compliance with the Aircraft Sector Understanding for Export Credits signed in the OECD framework, does not follow the spirit of the agreement in that the preferential credit rate gives the Canadian producer an advantage over European manufacturer, none of which can benefit from a similar governmental support (Italy or France are not direct lenders).

• ‘The ice cream initiative’: Canadian dairy producers instituted a CDN 13$ million/year programme to encourage Canadian dairy processors to use 100% Canadian dairy products in the manufacture of ice cream, instead of imported products, including imported butter-oil blends. The programme will give dairy processors a rebate on their cost of buying Canadian milk products. Contracts would be renewed annually and cover production from 1 January to 31 December with a start of 1 January 2009.

There aren’t any reports yet of how the fifth round of CETA talks went last week in Ottawa. Reports today about the effect on generic drug prices and availability of EU proposals for pharmaceutical patent and data protection extensions prove the negotiations will only get more controversial.