Minister defends $12B trade deal estimate
Trade Minister Peter Van Loan defended on Thursday the federal government’s assertion that a Canada-European Union trade deal will add $12 billion to Canada’s annual wealth by 2014.
The estimate, included in a 2008 joint Canada-EU study, is coming under criticism from analysts, with one describing it as a “sales pitch” that doesn’t take into account the impact of Europe’s debt crisis and the slide since 2008 in the euro currency.
“The number is almost certainly suspect,” Swiss Institute for International Economics Director Simon Evenett said Thursday.
The claim of $12 billion was made twice in the last six weeks in news releases issued by Van Loan, who has predicted an agreement will be struck by the end of this year.
It is based on the study’s 2008 projection that Canada’s gross domestic product would rise by 8.2 billion euros by 2014, or 0.77 per cent of GDP.
That figure apparently has not been updated recently, since 8.2 billion euros would convert over the past month from a low of $10.5 billion to a high of $11.2 billion.
Van Loan issued a statement noting that Canada could gain more due to developments since 2008 that weren’t taken into account by the authors.
“Yes, we are comfortable with the projected benefits,” he said. “The potential benefits of the Canada-European Union trade agreement may well exceed $12 billion.”
Evenett, who believes a Canada-EU deal will be positive but on a more modest scale, noted that the 2008 study was based on aggressive assumptions about the reduction of tariff and non-tariff barriers.
Free-trade advocates acknowledge the study’s shortcomings, but economist Hosuk-Lee-Makiyama said the report doesn’t give consideration to the “dynamics” and “efficiencies” Canadian companies will experience by getting easier access to a market with a population of about 500 million.