Harper Must Square the Provincial Circle on CETA






Earlier this month, as he was leaving the G20 summit in St. Petersburg, Prime Minister Stephen Harper announced that there was still no deal on a Comprehensive Economic and Trade Agreement (CETA) with the European Union (EU). At the same time, the prime minister described provincial governments as “partners” in the ongoing negotiations.  However, it is a rather dysfunctional partnership, and is one of the reasons why Canada and the EU have not been able to finalize an agreement despite several years of negotiations.

At one level, the lack of agreement is the result of continuing disagreements over some key issues. For example, it appears that the two sides have yet to agree on how much beef Canada will be able to export to the EU and under what conditions.  Similarly, there is no agreement on how much cheese the EU will be able to export to Canada tariff-free. Another sticking point is whether Canada will agree to harmonize its intellectual property regime to the EU’s with respect to pharmaceutical products.

Bad intergovernmental process may explain (at least in part) why, after four years of negotiations, there is still no agreement between Canada and the EU.

At another level, the lack of agreement may reflect the fact that Canada is unable to define its bottom line. For each of these outstanding issues, and several others besides, Ottawa needs differing degrees of provincial buy-in before it can finalize an agreement with the Europeans.

Outstanding issues are geographical in nature, and tend to pit provincial interests against each other. For example, Europeans may be willing to accept increased quotas on beef imports from Canada, but only in exchange for increased quotas on cheese exports. However, this means making beef-producing Alberta happy at the expense of dairy-producing Ontarians and Quebeckers. Moreover, in some cases provinces have a de facto veto. For instance, they can simply refuse to open up public procurement to more competition from European firms, something the Europeans keenly want.

Unlike Brian Mulroney’s approach during the free trade negotiations with the United States, Stephen Harper refuses to meet with the provincial premiers as a group, privately or publicly. This means that Ottawa finds itself negotiating with the provinces one on one. It is therefore more difficult to identify the tradeoffs that are inevitably needed to secure an agreement. For example, Ontario might be willing to agree to allow European firms greater access to contracts by Hydro One, or by Ontario cities like Ottawa and Toronto, if it knew that the cost of buying drugs for seniors was not going to spike upwards. Similarly, Alberta might be willing to agree to pay more for drugs if it were confident that Alberta beef producers were going to be able to export more to Europe. Such issue linkage happens all the time during trade negotiations.

If Prime Minister Harper is serious about making provincial governments true partners in negotiating international trade and economic agreements, his government will have to do more than just invite provinces to be part of the negotiations. First, provinces have to be party to all of the negotiations, not just those areas under provincial jurisdiction. It is absurd that provincial governments should have to resort to letter-writing campaigns to try to influence parts of an international trade agreement, as has been the case in the CETA negotiations.

Second, Ottawa and the provinces need to extend federal-provincial cooperation beyond negotiations, to include also decision making and implementation. There are several possibilities here, including regular meetings between the prime minister and the provincial premiers as well as frequent meetings by ministers responsible for trade.

Finally, a mechanism is needed to allow for formal buy-in by provincial governments. It is understandable that the Government of Canada wants to remain the sole signatory of international trade agreements. However, in order to ensure orderly and effective implementation of such trade agreements, Ottawa and the provinces should draft a parallel intergovernmental accord.

Bad intergovernmental process may explain (at least in part) why, after four years of negotiations, there is still no agreement between Canada and the EU. A return to a more robust, structured pattern of within-Canada intergovernmental negotiations will help Canada expeditiously and successfully to conclude international trade negotiations. More intergovernmental discussion within Canada would also increase the transparency and legitimacy of international trade and economic agreements.

These deals bring costs as well as benefits. As things stand, if and when a deal with the EU is signed, the federal government will want to explain why it thinks it has got the balance right. It risks having to do so absent the active support of one or more provinces. This will make it harder to convince Canadians that the agreement is in the national interest. In fact, bad intergovernmental process may mean that there is no deal at all.

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