EU-CANADA TRADE AND INVESTMENT "ENHANCEMENT"

UNCLAS SECTION 01 OF 02 OTTAWA 000327

SIPDIS

GENEVA FOR USTR

STATE FOR EB/TPP/BTA, EUR/ERA AND WHA/CAN

DEPT PASS USTR FOR NOVELLI, MELLE AND BOMER-LAURITSEN

USDOC FOR 4320/MAC/WH/ON/OIA/BENDER

USDOC PASS ITC - JENNINGS

Treasury for OASIA/IMI - Mathieu

E.O. 12958: N/A
TAGS: ETRD CA WTRO
SUBJECT: EU-CANADA TRADE AND INVESTMENT "ENHANCEMENT"

REF: BRUSSELS 00165


1. (U) THIS MESSAGE IS SENSITIVE, BUT UNCLASSIFIED. PLEASE
TREAT ACCORDINGLY.


2. (U) Reftel reported Brussels perspectives on plans for an
EU-Canada "Trade and Investment Enhancement Agreement,"
which were announced at the December 19 2002 EU-Canada
Summit in Ottawa. Embassy Ottawa ECON staff visited
counterparts at the Delegation of the European Commission in
Ottawa on January 28 to obtain their views of this
announcement.


3. (SBU) EC Delegation staff confirmed reftel's perception
that the EU is not enthusiastic about this initiative, and
they were forthcoming in explaining their position. They
emphasized that their top concern is to avoid diverting
resources from the Doha round of multilateral trade
negotiations. Another important concern is not to send any
signal to WTO members which might be misunderstood as
implying that the EU lacks confidence that the Doha Round
will reach a successful conclusion and deliver desired
results, particularly on market access.


4. (SBU) Following is a summary of key points made by
Delegation staff:

-- (SBU) GOC representatives have been very persistent in
pushing for a Canada-EU free trade agreement. This
continues a lengthy GOC history of (sporadic and
unsuccessful) efforts to diversify Canada's economic
relations away from the United States (which now receives
over 85 percent of Canada's merchandise exports).

-- (SBU) Over the past year, GOC demands for an FTA with the
EU gained urgency, presumably due to outgoing Prime Minister
Jean Chretien's well-known desire to leave a policy
"legacy."

-- (SBU) The European Commission did not see an
economic/commercial case for a full-fledged FTA, and did not
want to risk detracting from multilateral negotiations. GOC
trade policy experts (including International Trade Minister
Pierre Pettigrew) sympathized with this position, but other
factions in the GOC pushed very hard for FTA negotiations.

-- (SBU) There was some difference of opinion regarding the
value of a FTA among EU member states, and especially among
a few resident missions who have been lobbied by the GOC.
The EU Trade Policy Body, however, remained unified in their
position against a FTA.

-- (SBU) If immediate FTA negotiations were not attainable,
the GOC wanted an announcement prior to Chretien's
retirement that Canada and the EU would negotiate an FTA
following the conclusion of the Doha Round. The EU also
said no to this option, not only on the grounds cited above,
but also because it was considered a mistake to "stockpile"
trade policy commitments for the post-Doha era.

-- (SBU) On the eve of the December 19 bilateral summit,
Minister Pettigrew and EU Trade Commissioner Pascal Lamy
(who the EC delegation describe as having a superb
relationship) struck a compromise: negotiations will begin
as soon as possible (probably in 2004),but will not aim for
an FTA - rather, for a "Trade and Investment Enhancement
Agreement."

-- (SBU) The FTA-TIEA distinction is meaningful, indicating
that TIEA negotiations will not/not address "core trade
issues" on the table in Geneva - specifically, it will not
address market access for either agricultural or non-
agricultural goods. Areas which a TIEA could address
include trade and environment issues, government procurement
(in which the EU seeks better access to Canadian markets at
all levels),and regulatory cooperation. There are likely
to be parallels with recent EU-US liberalization efforts.

-- (SBU) The GOC has already conducted a tariff study and a
telephone business survey; the EU has done a more extensive
business survey.

-- (SBU) The likely timeline is for the trade ministers to
present leaders with an "architecture" for the TIEA at the
December 2003 summit, with leaders then mandating
negotiations to begin in 2004.

CELLUCCI