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London Stock Exchange chief tries to link Maple TMX bid to Canada-EU trade talks

Posture or informed protest? It’s hard to tell what information London Stock Exchange CEO Xavier Rolet leaned on when he threatened Monday that Canada-EU free trade talks “could suffer” if his plan to merge LSE with the Toronto Stock Exchange (TMX) falls through. The merger, which critics claim is more a takeover by the UK firm, has been challenged by a group of Canadian banks and financial firms calling itself the Maple Group. Rolet was in Toronto Monday to make another pitch for a merger versus what he called the monopoly option.

“Brussels does not see some of the recent rhetoric very favourably when you’re negotiating a free trade agreement,” said Rolet, quoted in the Financial Post. “It does look on the other side [of the Atlantic] a bit odd, if I may say,” he added, because there is “a significant financial services component.”

He’s right. There is a very important financial services chapter in the Comprehensive Economic and Trade Agreement — one with the potential to undermine Canadian regulations in finance and banking. The Council of Canadians raised the CETA negotiations in a letter to former Industry Minister Tony Clement, as well as in its case to the Ontario legislature, about why the LSE-TMX merger should not go ahead. The EU aggressively pushes its own way of regulating finance and investment in bilateral trade negotiations. And though Canada’s is the more resilient system, a leaked copy of the CETA text from October shows Harper is ready to compromise.

That doesn’t mean Rolet knows something we don’t about how the EU would react to Canada blocking the LSE-TMX merger. Each time a high-profile foreign takeover or investment is shot down in Canada–Potash, Montreal Metro cars are most recent examples–someone says it’s bound to hurt the free trade talks. But the talks continue. The EU has said they don’t like Canada’s foreign investment review process but they have their own, as does the United States.

So when Rolet says, as he did Monday, that “Free trade is the fastest generate of economic growth,’ and “the most important component of growth and investment and competitiveness,” and that the merger is “definitely growth orientated and opportunity orientated rather than sort of monopolistic and [having the appearance of] retrenchment,” he may just be calling in air support from the EU, using the coded language they’ll understand and deploy possibly when financial services liberalization comes up for discussion with Canada again in Brussels this July.