Canada and the 27 countries of the European Union on Friday announced plans to negotiate a comprehensive free trade agreement.
Prime Minister Stephen Harper made the announcement with French President Nicolas Sarkozy and Jose Manuel Barroso, president of the European Commission, at a meeting in Quebec City.
Canada and the EU are preparing formal positions now on the scope of negotiations, with the talks on "an economic partnership" to begin "as soon as possible in 2009," Harper said in a statement. He added at a press conference that "there is a pressing need for us to work together. These times call for closer economic cooperation."
Canada and the EU have already produced a joint study that says liberalized trade in goods and services would boost the economy of Canada's 33 million people by about C$13 billion (US$11 billion) a year and by about $19 billion (US$16.2 billion) for the 500 million people of Europe.
A free trade agreement with Canada would be the EU's first with a developed country. It has already negotiated accords with high-growth Asian countries such as South Korea and India.
Tariffs on most goods exchanged between Europe and Canada are relatively low, but Europe will press for common procurement arrangements with Canada's 10 provinces as well as with the federal government -- something Ottawa cannot promise without the approval of the provinces. Negotiations are expected on harmonization of regulations; on an open-skies accord; on free movement of workers and investment between Canada and Europe, and agreements on environmental regulations and carbon trading. Both sides may defend their respective agricultural subsidies.
Canada-Europe merchandise trade totaled about $78 billion in 2006, with two-way investment at $263 billion. By comparison, Canada-United States trade was $626 billion and two-way investment was $497 billion.