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NEWS: How might Europe’s economic crisis affect CETA talks?

Jim Stanford

CBC reports, “The demise of the euro would deliver a significant blow to the Canadian economy, leading to less trade, higher unemployment and a possible recession, financial experts say. …With some European countries seemingly unable to control their spiralling debt crises, and with uncertainty over the type of financial relief the European Central Bank may contribute, there are fears the end of the euro is near. …Louis Gagnon, finance professor at Queen’s University School of Business in Kingston, Ont., explained that if the euro dissolved as a currency, a number of countries with their debt denominated in euros would immediately have to default… As some European governments would default, banks holding those bonds would not have money to lend, drying up liquidity, sparking a severe global economic contraction and causing a major economic crisis.”

“Walid Hejazi, associate professor of international business at the University of Toronto’s Rotman School of Management, said he worked with the Department of Foreign Affairs on the first study on deepening the economic relationship between Canada and EU in 2008. ‘There was tremendous goodwill about the benefits that come between Canada and the EU,’ he said. …(But) Matthias Kipping, professor of policy and chair in business history at Schulich School of Business, said the euro collapse would mean countries would become more protectionist, which would have a major affect on a country like Canada that relies on exports.”

In a July 20, 2011 blog, Council of Canadians trade campaigner Stuart Trew wrote about CAW economist Jim Stanford’s comments on CETA and the deepening economic crisis in Europe. Trew wrote, “(Stanford argues) Europe will be in worse shape than Canada for a while thanks to government austerity measures. ‘Our market is growing, theirs is not. Guess who’ll get more new business from the deal?’ …Stanford says Harper and gang are charging ahead with an EU deal to pretend they have a plan for the worsening global economic crisis. He concludes, ‘I throw my lot in with the financial experts. I’d say it’s time to reduce, not increase, our national economic exposure to Europe.'” For the full blog, go to http://canadians.org/blog/?p=9652.

And in July 2010, Stanford wrote in the Globe and Mail that, “A truly mutual economic partnership with Europe would be great – one where they buy as much from us as they sell to us, and good stuff, too, not just resources. But a free-trade agreement (like the Canada-EU Comprehensive Economic and Trade Agreement) won’t do that. Meantime, we’ll be dragged down by Europe’s coming funk, which will easily last a decade. …In case our negotiators haven’t noticed, Europe is sinking under the weight of recession, debt and profound institutional failure. Is this really the best time to jump on board that particular ship? …Better to take a pass on this one, and negotiate a better deal with the Europeans somewhere down the road, once they’re back on their feet.” More on that at http://canadians.org/blog/?p=5075.

If Europe does become more ‘protectionist’ as Kipping suggests, that may well be a key obstacle to the ratification of CETA in the European Parliament and in their national legislatures.

In terms of Stanford comments of the impact of CETA on the Canadian economy:

In January, Postmedia News reported, “Canadian Auto Workers economist Jim Stanford noted that the 2008 joint Canada-EU study (that Hejazi was involved in) doesn’t take into account the sharp rise in the Canadian dollar since 2008. ‘There’s no consideration of the fact our products are 20 per cent more expensive relative to Europe than we were just a couple of years ago,’ Stanford told Postmedia News. ‘It is more of a sales pitch for why we should be doing this.’”

In October 2010, the Globe and Mail reported, “A free-trade agreement between Canada and the European Union would deal another blow to Canada’s already battered manufacturing sector, wiping out thousands of jobs in food processing, apparel making and the auto industry, according to an analysis of the potential agreement.” A study by Stanford reported in this article suggests Canada could lose 28,000 to 152,000 jobs under CETA, http://canadians.org/blog/?p=4438.