Prepared by:

Curtis Matwychuk-Goodman

written March 19, 2009

Abstract

Saskatchewan should be considered Canada’s third fastest growing regional economy. Since the turn of the century Saskatchewan’s economy has diversified and expanded in many ways. With a population of slightly more than a million people Saskatchewan has increased economic output and tripled the value of exports in the past twenty years. As Canada begins to negotiate an increased economic partnership with the European Union how will this impact Saskatchewan’s trade profile?

This paper will be divided into three sections. First it will examine the foreign trade profile of Saskatchewan as a province. This section will cover an overview of Saskatchewan’s trade profile including recent economic performance and major trading partners. In addition this paper seeks to elaborate on the policy process of Saskatchewan – specifically examining the role of institutional actors like the political executive, legislature and the bureaucracy, as well as sector considerations and nongovernmental actors.

The second section of this paper seeks to provide a review of the relevant issues of the proposed Canada – European Union trade agreement. In 2007 a Joint-Framework Proposal report entitled Assessing the Costs and Benefits of a closer EU-Canada Economic Partnership was released. This paper will identify major issues affecting Saskatchewan’s international trade interests from Parts II and III of the Joint Study Report.

The final section of this paper will identify Canada’s position on a proposed EU trade agreement. It will identify specific issues and priorities of the Saskatchewan delegation. A short-list of key recommendations will provide insight on target areas to improve trade relations between Saskatchewan and the EU.

Ultimately this paper will provide the reader with a comprehensive background of Saskatchewan’s international trade profile while reconciling such information with the proposed Canada – EU Trade Agreement. In the end the reader will have a clear understanding of how Saskatchewan is involved in the trade negotiations and identify realistic impacts and policy outcomes of their involvement.

– Part I –

Saskatchewan, Ranked Third Overall

This section will accomplish two things. First it will identify that Saskatchewan can be thought of as the third most important regional economy in Canada. This will be demonstrated through identifying the key areas of the provinces trade portfolio including: the location advantages which lead to competitive advantage; the recent economic performance; and the significant trading partners of Saskatchewan. This section draws from a key source – namely the Saskatchewan Institute of Public Policy (SIPP) and their Provincial Progress Report released in 2008.

The second part of this section will seek greater clarity on the policy process of international trade negotiations at the sub-federal level. This part will be by and large based on the book, The Provinces and Canadian Foreign Trade Policy by Dr. Christopher Kukucha. The book offers great clarity in four main areas most affecting trade policy including – institutional pressures of the executive and legislature; the sector-specific interests of private enterprise; and the non-governmental interests.

Saskatchewan Trade Profile

Traditionally Saskatchewan has relied on resource-based exports, and this is still very true today. However, in examining the Saskatchewan economy we see considerable change in the composition over time. It has only been within the last few decades that Saskatchewan has successfully diversified their trade profile from an agrarian-based economy to a mining and petroleum orientated economy; heavily reliant on support-services like finance, insurance and real estate<!–[if supportFields]> CITATION Mar08 \l 1033 <![endif]–> (Marshall 2008)<!–[if supportFields]><![endif]–>.

Examining the location advantages of Saskatchewan we find many areas with potential for gaining serious competitive advantage in world trade. The availability of fertile and arable land has facilitated the expansion of agriculture in both grains and forestry sectors. In the early 1990s agriculture dominated the regional economy. Agriculture was driven by a principle reliance on the major grains such as wheat, barley, rye, oats and triticale. In fact, the agriculture production in Saskatchewan is still dominated by grains with over 69% share, followed by flax and canola crops accounting for almost 19% and the remaining 11% covered by pulse crops like peas and lentils<!–[if supportFields]> CITATION Mar08 \l 1033 <![endif]–> (Marshall 2008)<!–[if supportFields]><![endif]–>. However, now agriculture, forestry and fishing combined account for only 7.4% of the total Saskatchewan economy [1] <!–[if supportFields]> CITATION Bur05 \l 1033 <![endif]–>(Bureau of Statistics 2005)<!–[if supportFields]><![endif]–>. The traditional importance of agriculture has facilitated the development of a specialized cluster benefiting complementary industries in sectors like agriculture and crop sciences, biotechnology and life-sciences.

The performance of agriculture has not significantly contributed to the growth of Saskatchewan’s trade portfolio in the last decade. According to the Saskatchewan Institute of Public Policy (SIPP) the realized net farm income has remained relatively constant for the past fifteen years at $421 million (2008, p 21). This indicates a constant level of crop production for almost two decades. During this time livestock production has increased sixty percent from 1991 – 2007, with a primary interest in pigs and beef cows. However, events like BSE infections effectively closed many borders for live-export and raised questions related to Sanitary and Phystosanitary Measures, which will be discussed in greater detail in the second part of this paper. Saskatchewan farmers have pursued diversified crop strategies and some increased livestock-based ventures. These efforts have been impacted largely by the increasing cost of operations pushing up the overall cost of production and restricted market access. Overall agriculture represents a small portion of overall trade, and is just one of many valued sectors.

The expansive Canadian Shield that covers almost half of the province with valuable minerals, contributes to a vibrant mining and energy sector. In addition to the mineral deposits like potash and uranium Saskatchewan is also endowed with carbon energy reserves in the form of coal, natural gas and oil. Combined minerals and petroleum account for 12.5% of the Saskatchewan economy<!–[if supportFields]> CITATION Bur05 \l 1033 <![endif]–> (Bureau of Statistics 2005)<!–[if supportFields]><![endif]–>. Minerals and petroleum have become primary drivers of the new Saskatchewan economy. Commodities such as oil, potash and uranium have become even more important to Saskatchewan’s trade portfolio, especially as world demand increases which results in higher prices for such commodities.

To illustrate the increasing importance we look to the gains made by crude oil, potash and uranium between 1991 and 2006. Through this period crude oil has increased the value of production from $1.2 billion annually to $7.9 billion; potash has developed into a leading-producer with revenues starting at $765 million in the early 1990s to $2.2 billion by 2006; and uranium has seen the largest volume in export growth at over 200% growth in the same period<!–[if supportFields]> CITATION Mar08 \l 1033 <![endif]–> (Marshall 2008)<!–[if supportFields]><![endif]–>. It is not surprising of the economic fallout of the industry, given the inflated energy prices between 2004 and 2008 were based on increased world demand.

As of 2006 services dominated with slightly better than two-thirds, 66.8%, of the total Saskatchewan’s economy; while goods produced contributed less than one-third, only 32.2%<!–[if supportFields]> CITATION Mar08 \p 13 \y \t \l 1033 <![endif]–> (Marshall, 13)<!–[if supportFields]><![endif]–>. This has substantially increased the value of the total gross-domestic product, which will be further discussed in the economic performance section. Other strength areas in Saskatchewan’s portfolio include:

· Crude petroleum, worth over $5.8 billion in 2006

· Fertilizers and potash, over $1 billion and stable since 1998

· Tubes and pipes

· Particle board

· Uranium

· Canola and colza

· Live bovine animals

Recent Economic Performance

To understand the real performance of Saskatchewan as a province it is important to consider the overall domestic environment and performance of Canada as a whole. In the five year period starting in 2001, Canada outperformed most of the OECD and G7 countries with an average annual growth rate of 2.7% and a cumulative growth of 16.5%<!–[if supportFields]> CITATION Mar08 \p 3 \y \t \l 1033 <![endif]–> (Marshall, 3)<!–[if supportFields]><![endif]–>. With a strong combined economy Canada fostered an environment of economic stability and prosperity. This was in part driven by the performance of Saskatchewan’s regional economy.

For in depth understanding of the performance of Saskatchewan this paper will use three key indicators. The concept of Gross Domestic Product (GDP) is used to measure the total output of national economies. It includes the measure of consumption, gross investment, government spending, and the value of net exports. Real GDP measures the total market value of all goods produced. Nominal GDP is a different measure that factors in the actual change in value of goods produced over a given period. The GDP per capita is simply the total GDP divided by the population.

The Saskatchewan Institute of Public Policy (SIPP) Overview of the Economy was a report released in 2008. The SIPP report offers detailed information on the performance of Saskatchewan between 2002 and 2006. During this period Saskatchewan endured considerable growth in the economy; Saskatchewan managed to rank third overall among Canadian provinces when comparing growth of both real and nominal gross domestic product (GDP) as well as GDP per capital.

- The annual economic growth for this period in terms of real GDP was 2.9%, marginally ahead of the national average of 2.7%.

- The nominal GDP was 6.7% well ahead of the national average of 5.5%.

- The GDP per capita, or output per person, has steadily improved over the period to the 2006 level of $46,603; this marks a considerable improvement over 2001 levels of $33,100.
<!–[if supportFields]> CITATION Mar08 \p 9-11 \l 1033 <![endif]–>(Marshall 2008, 9-11)<!–[if supportFields]><![endif]–>

Overall, the economic performance of Saskatchewan has consistently ranked third overall in Canada in the three key indicators[2]. This is in part due to the rise in commodity and energy prices. The long term outlook is consistent growth in the areas of mining and petroleum, followed by services and agriculture<!–[if supportFields]> CITATION STE08 \l 1033 <![endif]–> (STEP 2008)<!–[if supportFields]><![endif]–>.

Trading Partners

Throughout history Canada has been divided over prioritizing trade partners. As a result Canada has consistently taken the safe approach and settled with the geographically closest and largest market – the United States of America (USA). By and large the most prominent global trading partner USA offers a large export market and serves as Saskatchewan’s biggest export destination.

According to Kukucha, in 2006 almost sixty-six percent of all exports went south to the USA. South-bound trade patterns are characterized with strong relationships with states like Montana, Wyoming and Illinois. Typically the trade in goods is in expensive chemicals, machinery and equipment. More specifically these include passenger vehicles, tractors and farm equipment, bulldozers, trucks and retail pesticides. The state of Illinois is responsible for 90% of all imports from the USA. <!–[if supportFields]> CITATION Kuk08 \n \l 1033 <![endif]–>(The Provinces and Canadian Foreign Trade Policy 2008)<!–[if supportFields]><![endif]–>

The second and third largest trading partners of Saskatchewan have historically been the nations of Japan and China. By 1992 China had become the second most important trading nation representing almost thirteen percent of total exports mostly in wheat and grains<!–[if supportFields]> CITATION Bur05 \l 1033 <![endif]–> (Bureau of Statistics 2005)<!–[if supportFields]><![endif]–>. However since 2006 this trade relationship has diminished to below five percent<!–[if supportFields]> CITATION Mar08 \l 1033 <![endif]–> (Marshall 2008)<!–[if supportFields]><![endif]–>. The biggest emergence in the Saskatchewan international trade portfolio is due to the further commercial exploitation of potash. One of the key ingredients in fertilizer, potash has experienced increased demand in recent years as the world adapts to looming food-shortages. This will no doubt alter the trade network Saskatchewan operates in as nations such as China seek increased supply of agriculture-based inputs including fertilizers.

The European Union represents a small percentage of Saskatchewan’s overall external trade. Currently the EU has twenty-seven members and now offers harmonized trading principles – covering technical standards like rules of origin to coordinating national economic policies. The most common trade in goods between Canada and the EU are products like chemicals and large machinery<!–[if supportFields]> CITATION Can071 \l 1033 <![endif]–> (EC and Govt of Canada 2007)<!–[if supportFields]><![endif]–>.

Saskatchewan’s Role in Trade Negotiations – Policy Process

As trade negotiations have become more comprehensive moving beyond just trade in goods, they begin to encroach upon provincial jurisdictions. The federal government does not have direct control over such policy areas as: education, hospitals, property, local works, and natural resources. This means that the provinces must be consulted when it comes to such matters of jurisdiction. There are a number of ways this occurs on a federal-provincial level[3] but is usually in the form of consultations from International Trade Advisory Committees (ITAC). This discussion will focus on four specific areas within Saskatchewan’s jurisdiction that have the potential to influence trade negotiations. These are institutional actors including the provincial political executive, legislature and bureaucracy; sector-specific considerations; and non-governmental or societal actors.

Political Executive

The political executive and the legislature of Saskatchewan have always been committed to a strong role in the trade negotiation process. Throughout the province’s history social welfare has maintained a top priority – this is evident in the fact that the federal New Democratic Party has origins in Saskatchewan. Originally the party started as the first ever socialist government formed in North America – the Cooperative Commonwealth Foundation (CCF). This history has given the province a lead advantage in government competence in state-planning activities. International trade issues have also been principle since Canada started multilateral negotiations in the post-WWII world. Agriculture has typically been at the forefront of the trade agenda.

In the 1970s the world developed an acute awareness of the scarcity of resources. During this period the provincial government took the liberty to nationalize many of the core natural resources endowed upon the province. Resources considered vital to public-interest were: oil, natural gas, potash, uranium and other minerals. Some of the early crown corporations which developed the oil and gas sector are now major industry players in Canada one example is Nexen. Also, Cemeco one of the largest uranium producers was once a Saskatchewan crown corporation; as was the Potash Corporation of Saskatchewan which has since been sold to other major industry players. The Crown Investment Corporation allows the government to oversee a handful of commercial interests in such areas as research and innovation, telecom, insurance, power and natural gas generation and distribution. These are found in such organizations as Sasktel, Saskatchewan Government Insurance, SaskPower, and SaskEnergy. The portfolios are overseen by Cabinet Ministers but are independently managed and responsible to their respective Board of Directors. <!–[if supportFields]> CITATION Kar06 \l 1033 <![endif]–> (Schmidt 2006)<!–[if supportFields]><![endif]–>

This demonstrates government involvement aided in stimulating industrial development of the province. The political will on the part of the political executive to create such enterprises indicates a desire to achieve international competencies. However, such direct involvement in the economy is considered to be trade distorting and is considered a potential issue to trade

According to Kukucha the Saskatchewan political executive has played an active role in promoting increased trade competence, especially in comparison to other provinces. During the NAFTA negotiations the province actively promoted policies that served their regional economic interests – especially on agriculture. However, the realistic impact of their efforts on policy outcomes may be less than impressive. In fact the bureaucracy and technical specialists had a clearer understanding of the actual impacts of international trade agreements such as NAFTA and the WTO, whereas the political executive provided relatively little substantial input on major policy decisions.

Bureaucracy and Legislature

Saskatchewan appears to have a greater commitment to international trade issues than many other provinces. Trade policy is led by the Trade and International Relations Department within the Ministry of Government Relations. The department is small, comprised of three senior trade analysts under the leadership of one director. Resources are limited which does not allow for a long-term strategic approach to every issue.

One of the challenges faced by the bureaucracy is their ability to meaningfully impact negotiations. The increasing legalization of international trade agreements have brought about complexities of interpretation and application. Since international agreements must be implemented by domestic legislatures, provinces must be willing to employ the services of lawyers and trade policy-experts to ensure proper translation and regulatory compliance. Senior bureaucrats express that it can be especially challenging during negotiations and dispute resolutions for trade officials to have adequate grounding to meaningfully impact policy outcomes. Strategically the bureaucracy must have a coordinated approach to ensure policy outcomes are both beneficial and applicable to their constituents. The bureaucracy focuses on issue-specific tasks depending on the priority in Saskatchewan’s trade profile. <!–[if supportFields]> CITATION Kuk08 \p 86 \y \l 1033 <![endif]–>(Kukucha, 86)<!–[if supportFields]><![endif]–>

Mutual interest on sector-specific issues has given rise to inter-provincial cooperation, mostly in Western provinces. Alliances have proven valuable to develop trade policy objectives that are adequate at serving a larger regional interest. Kukucha notes that Alberta and Saskatchewan have worked together on softwood lumber and wheat issues during rounds of WTO negotiations. However, meaningful cooperation can be difficult to achieve especially since provinces are often in direct competition with one-another. This means cooperation is often sporadic and issue-driven.

Sector-specific Interests

Saskatchewan has a relatively small economy – with few large industry players competing for a small domestic market. Ties between business and government are usually few and informal. In fact line departments are often responsible for aligning policy principles with business actors. Contact with industry associations is tied to line-departments, typically headed by a Minister charged with a mandate of particular jurisdiction <!–[if supportFields]> CITATION Fri05 \n \l 1033 <![endif]–>(Pillar of Canada Foreign Policy 2005)<!–[if supportFields]><![endif]–>. The Trade Policy Branch of Saskatchewan has a concentrated focus on agriculture, transportation, and environmental services.<!–[if supportFields]> CITATION Kuk08 \p 113 \y \l 1033 <![endif]–> (Kukucha, 113)<!–[if supportFields]><![endif]–>

Sectoral Advisory Groups on International Trade (SAGITs) are tools used to facilitate greater cooperation among federal, provincial and sectoral interests. There are twelve areas of particular focus of SAGIT – those that are most pertinent to Saskatchewan are: agriculture, food and beverage; energy, chemicals and plastics, mining metals and minerals.

Saskatchewan Trade and Export Partnership (STEP) is a public-private enterprise aimed to increase the province’s trade profile and encourage cooperation on future trade agreements. Utilizing both private and public sector funding STEP provides consultation with Saskatchewan industry in four unique ways; by providing export financing assistance, market intelligence, market development support, and export education and training. This partnership allows exporters to tap into new markets by initiating sales, developing projects and facilitating contracts and financing. <!–[if supportFields]> CITATION Neu01 \l 1033 <![endif]–>(Neumann 2001)<!–[if supportFields]><![endif]–>

Non-Governmental Influences

Saskatchewan is similar to Manitoba in its approach to international trade issues – pursuing a consultative route, with direct input from the federal government and a wide variety of societal actors including industry, academia and unions. Given the underdeveloped nature of non-governmental actors on international trade issues most are not included in the policy process. Non-governmental groups often suffer from “consultation fatigue,” where they face both limited resources and lack the coordination to effectively engage multiple government departments across many levels of government. Regional interests do not necessarily give rise to substantial movements. The especially small population of Saskatchewan does not offer significant support for regional interest-based agendas. The technical nature of international trade negotiations also limits the involvement of many non-governmental actors. The increasing complexity and legality of documents requires a dedicated team of professional translators and interpreters to contribute in a meaningful way. <!–[if supportFields]> CITATION Kuk08 \p 136 \y \l 1033 <![endif]–>(Kukucha, 136)<!–[if supportFields]><![endif]–>

– Part II –
Moving Towards a Canada–EU Trade Partnership

Canada’s trade with the European Union is significant. To put it in perspective, Canada’s second largest trading partner is the European Union. Almost five percent of total exports are bound for Europe; while Canada receives almost twelve percent of her imports from Europe <!–[if supportFields]> CITATION Bil08 \l 1033 <![endif]–>(Bilateral Trade Relations – Canada 2008)<!–[if supportFields]><![endif]–>. The significance of Canada as a trading partner for the European Union is much less – as Canada comprises less than two percent of total external trade. To put this in numbers, by 2007 the two-way trade between the nations was in excess of $12.2 billion dollars. Canadian exports, according to the Department of Foreign Affairs and International Trade were valued at $5.2 billion and imports $7.7 billion. <!–[if supportFields]> CITATION Dep09 \n \l 1033 <![endif]–>(Canada-European Free Trade Association (EFTA) 2009)<!–[if supportFields]><![endif]–>

The trade relationship between Canada and Europe has been in development since before the European Union was formed. In 1976 a bilateral accord was struck with the signing of the Framework Agreement in Commercial and Economic Cooperation between Canada and the European Economic Commission. The two parties were on their way to closer integration in trade negotiations facilitated through Joint Cooperation Committees (JCC). These committees are designed to meet once a year to discuss ways of improving trade. During a recent JCC Leaders’ Summit in Berlin, June of 2007, Canada approached the European Union with the hopes of establishing a Free Trade Agreement. It was decided that a Joint Study would be used to identify ways to further economic cooperation between the European Union and Canada. The purpose of the study was:

… designed to provide EU and Canadian Leaders with as comprehensive and up-to-date a picture as possible of the potential costs and benefits of closer economic partnership, to allow for informed policy decision-making on future bilateral economic cooperation. In addition to examining potential gains from removing factors affecting the free flow of goods, services and capital, consideration is given to areas such as labour mobility, government procurement, intellectual property rights, telecommunications services and electronic commerce, as well as to the potential benefits of enhanced collaboration in a wide range of related fields from regulatory cooperation to transportation.
<!–[if supportFields]> CITATION Joi09 \l 1033 <![endif]–>(Joint Report on the EU-Canada Scoping Exercise 2009)<!–[if supportFields]><![endif]–>

Trade Relationship

There have been numerous studies undertaken in recent years that indicate further trade liberalization would benefit Canada and the European Union. The benefits would be mutually shared in such areas as transportation, machinery, and equipment. According to the EU-Canada Joint Study on Assessing the Costs and Benefits of an Economic Partnership, the tariff on trade in goods is already relatively low. Although some data sources suggests evidence of EU-products facing higher tariff barriers of 3.5% weighted-average entering the Canadian market; whereas Canadian goods only face a 2.2% weighted average entering the EU common market. <!–[if supportFields]> CITATION Placeholder1 \n \t \l 1033 <![endif]–>(2007)<!–[if supportFields]><![endif]–>

Trade in services is significant between Canada and the EU. In fact in 2007 service-based trade was valued at over $20 billion. The Joint Study identified four target barriers that still exist for trade in services. The first is Canada’s restriction on foreign ownership which extends into further restrictions on the type of commercial interests and amount allowed by foreign entities. The third issue arises over discrimination of foreign nationals in their registration requirements to conduct business between the two zones. The fourth issue is that of domestic favouring in trade of services. Although it can be difficult to quantify the barriers to trade in services the Joint Study report predicts that the four barriers amount to significant additional costs of business. These predictions range from 24-52% additional cost of doing business in Canada; and 18-42% additional cost of services going into the EU. <!–[if supportFields]> CITATION Placeholder1 \p 44 \l 1033 <![endif]–>(European Commission, Government of Canada 2007, 44)<!–[if supportFields]><![endif]–>

The following represents some of the key findings of the Joint Report Parts II and III. The focus will be on five sections: agriculture, telecommunications, energy, regulatory cooperation, labour and the movement of people.

Agriculture

Canada is often viewed as a ‘two-headed beast’ when it comes to agriculture negotiations. There are certain sectors which promote protectionist measures as a means of supplanting domestic competency – notably Quebec’s poultry and dairy industry. Meanwhile, other provinces like Saskatchewan rely on export are adamant towards liberalizing trade and improving market access.

To further complicate matters the issue of agriculture subsidies is of greatest concern to most countries in international negotiations. The Canadian Wheat Board (CWB) and the Saskatchewan Wheat Pool have been challenged by many nations as forms of agriculture subsidy. Since the CWB guarantees a purchase price for farmers, based on total costs, other nations believe that Saskatchewan farmers have an unfair advantage. This is not necessarily true however, according to WTO subsidy targets; Canada is among the lowest in terms of transfers based on a percentage of total value of production of wheat <!–[if supportFields]> CITATION Can071 \p 103 \y \l 1033 <![endif]–>(EC and Govt of Canada, 103)<!–[if supportFields]><![endif]–>.

Genetically modified organisms (GMO) represent a major trade issue for Canada and the EU. Saskatchewan has developed a world-class biotechnology cluster with major complementarities in the neighboring provinces of Alberta and Manitoba. One of the outcomes of this cluster has been specialty GMO crops like Canola. Major multinational corporations, like Monsanto, Dow AgroScience and Advance technologies had head offices in Saskatchewan. Although according to STEP many companies moved their head offices to Alberta in favour of lower taxes <!–[if supportFields]> CITATION STE07 \l 1033 <![endif]–>(STEP 2007)<!–[if supportFields]><![endif]–>. The impact of these firms was enormous in terms of economic output and significantly contributed to trade in intellectual property.

The main regulators of GMOs are the Canadian Food Inspection Agency (CFIA) and Health Canada. These regulatory agencies are of the opinion that regulation of new plants should be based on product not process; this effectively eliminates the debate over whether GMOs should be allowed on the market. The European Union however, believes regulation should also encompass the process as well as product. In order for GMO-based foods to be allowed into the European market there is extensive regulatory approval processes and increased labeling requirements <!–[if supportFields]> CITATION Placeholder1 \l 1033 <![endif]–>(European Commission, Government of Canada 2007)<!–[if supportFields]><![endif]–>. This regulatory divergence may lead to significant trade barriers for some agriculture products – definitely impacting Saskatchewan’s trade priorities<!–[if supportFields]> CITATION deC03 \l 1033 <![endif]–> (de Clercy 2003)<!–[if supportFields]><![endif]–>.

Key hindrances for Saskatchewan exports to the European Union are on foodstuffs. Currently there are quotas, sanitary standards and packaging requirements that pose a barrier to trade. It is also arguable that the EU has higher rates of subsidies. Agriculture has consistently proven the most difficult area to reach comprehensive agreements on. Any progress on increasing the transparency in terms of technical and safety standards will be a success.

Telecommunication

Canada has regulations mandating eighty percent Canadian ownership and majority representation on the board of directors of telecommunication companies. The EU claims that because of foreign ownership restrictions and the fact that EU-firms are limited to the reselling and provision of satellite services they are at an unfair advantage compared to domestic companies. The argument is that because of the involvement of Crown Corporations in the economy a poor investment environment exists to foreign interests. This means that Saskatchewan may have to eliminate such restrictions and be willing to reduce government involvement in the industry. <!–[if supportFields]> CITATION Can071 \p 44 \y \t \l 1033 <![endif]–>(EC and Govt of Canada, 44)<!–[if supportFields]><![endif]–>

Science and Technology

Already there is great cooperation between Canada and the EU in this area. In 1996 an Agreement for Scientific and Technological Cooperation between Canada and the European Community was reached aimed at establishing goals for joint collaboration in mutual areas of interest and benefit. According to the Department of Foreign Affairs and International Trade almost thirty-five percent of Canada’s new science and technology is through collaborative research with EU members <!–[if supportFields]> CITATION DFA07 \n \l 1033 <![endif]–>(Europe: A Global Strategy 2007)<!–[if supportFields]><![endif]–>.

There are ways to enhance the trade relations through tighter cooperation. For example the Joint Study addresses two potential fields of cooperation; first, by creating a common research agenda with a flagship project and second by addressing critical areas in the need of greater cooperation. Possible areas of cooperation include climate change and global warming, energy efficiency, renewable energy, fuel cells, information and life technology.

Initiatives that may enhance cooperation include such things as improving reporting and knowledge sharing among nations. This may be done through mapping local competencies and expertise; dedicating Canadian government funding for EU-collaborations; and increased networking capacity. One particular area addressed in the report is that of sub-federal importance in science and technology. Since Canadian provinces are responsible for education and research they should have a greater voice in the governance structure of joint-initiatives. Finally, trade relations in science and technology may be improved by reducing hurdles of administration, in such ways as twinning complementary regulatory programs and defining intellectual property in joint-projects.

Initiatives exist which promote the commercialization of new technologies. Funding is available through the Framework Programme 7 (FP7) – Joint Technology Initiatives, FP6 ERA-NET Scheme and EUREKA. Saskatchewan already receives funding under the FP7 initiative in areas of agriculture and bio-technology. <!–[if supportFields]> CITATION Mar08 \l 1033 <![endif]–>(Marshall 2008)<!–[if supportFields]><![endif]–>

Energy

Excellent export opportunities exist for Saskatchewan in energy. Saskatchewan is endowed with substantial uranium deposits, McArthur River and Key Lake being the principle production areas. Since Europe is most involved in nuclear power they are a prime market for increased trade relations in this area, especially with countries like France and Germany.

Under the Canadian Constitution the federal government is limited to energy issues of international importance, interprovincial issues and uranium management. The energy policy in Canada is characterized by a market-approach – where competition is the ultimate decider in investment decisions. According to the International Energy Agency (IEA) Canada is the second largest source of energy reserves; likewise Canada is the largest exporter of uranium, responsible for 85% of all word-wide mine production. In 2003 Canada produced 10,000 tonnes of uranium which equated to over $3.4 billion in export value. Accordingly, Canada is the European Union’s principle supplier of uranium. <!–[if supportFields]> CITATION Int04 \n \l 1033 <![endif]–>(Energy Policies of IEA Countries: Canada 2004)<!–[if supportFields]><![endif]–>

The European Union has identified two areas to improve energy policy. One is to address the issue of climate change and the impact of energy. The goal is to mitigate the harmful impacts of energy production. The second area of interest is to increase competitiveness in the energy marketplace. Currently there is cooperation between both countries through government and non-governmental means. The IEA is an instrument used by governments, designed to facilitate energy policy discussions. Nuclear energy research and development is controlled by an agreement between Canada and EURATOM. The Canada Europe Round Table for Business (CERT) is a non-governmental agency designed to foster cooperation in such energy areas as investment, infrastructure, and new technology. In 2007 CERT held a round table discussion on nuclear energy.

Potential areas for further cooperation outlines in the Joint Report are increased cooperation and a joint-initiative for energy science and technology. Ultimately greater harmonization of best practices, energy efficiency, and renewable energy will benefit the trade relationship between Canada and the EU. The Report recommends a joint-venture in research of clean coal, carbon capture and biomass.

Regulatory Cooperation

In 2004 Canada and the European Union agreed to greater cooperation of federal policy makers over new and existing regulations through the Framework on Regulatory Cooperation and Transparency. Although this Framework is not legally-binding it does provide support in the form of technical and regulatory advice to policy makers. In addition to this agreement Canada and the EU are also bound by larger multilateral agreements under the World Trade Organization (WTO). These are the Agreements on Technical Barriers to Trade, and Application of Sanitary and Phyto-Sanitary Measures (SPS). The problem with these agreements is they do not address sub-federal jurisdictions or the regulation of services. This means they have little binding-impact on Saskatchewan as a province.

As of the Leaders Summit in Berlin, 2007, it was agreed that a more comprehensive agreement would be a priority for both Canada and the EU. Such an agreement would be based on inclusion of sub-federal regulatory agencies and authorities. The University of Saskatchewan has leading research in the fields of medical, pharmaceutical, agriculture, engineering and veterinary medicine. The province would provide an excellent base for consultation in technical areas such as the trade <!–[if supportFields]> CITATION deC03 \l 1033 <![endif]–>(de Clercy 2003)<!–[if supportFields]><![endif]–>.

Transportation

For Saskatchewan the transport link with Europe is limited to very few air-based connections, but principally on interprovincial rail-links to transport goods to and from major Eastern ports. Currently there is close integration on air transportation regulation between Canada and the EU. This is primarily through NAV Canada and Eurocontrol. However, Canada maintains close control over foreign ownership interest in air-based transport. Ownership is limited to a maximum of twenty-five percent of total voting interest; foreign entities are also not able to provide domestic flights. This has been identified as a barrier to trade by the European Union.

Employment and Movement of People

Another area identified in the Joint Report is labour mobility. Given the increasing globalization of enterprise many businesses require mobility of representatives and have identified the current regulatory framework as a hurdle to doing business.

The EU has worked towards a standardized process, yet there are still multi-stage requirements like visas, justification of business purpose and work permits. In Canada the Temporary Foreign Worker Program (TFWP) is a federal initiative that coordinates with provincial jurisdictions to meet the labour requirements of regional areas. Employment is provincial jurisdiction, therefore rules vary and do not necessarily have transferability across Canada due to differences in licensing and accreditation standards. By harmonizing the labour mobility and border services the EU and Canada may experience any number of benefits; these may be increased labour complementarities or more effective allocation of skills. The Joint Study points to a historical positive correlation between labour mobility and increased investment and export relationships. <!–[if supportFields]> CITATION Can071 \p 61 \n \l 1033 <![endif]–>(200761)<!–[if supportFields]><![endif]–>

Results of the Joint Report were discussed in October of 2008 during another JCC Leaders Summit in Quebec City. The results of the conference promised a commitment from the European Community to obtain the mandates necessary to launch negotiations as early as possible in 2009. The EU has identified three areas of priority in a future economic partnership – energy – environment – and international peace and security <!–[if supportFields]> CITATION EUC08 \l 1033 <![endif]–>(EU-Canada Summit 2008)<!–[if supportFields]><![endif]–>. The next section will examine Canada’s position on an economic partnership and identify recommendations specific to Saskatchewan for the upcoming negotiations.

– Part III –

Canada’s Trade Priorities

According to the DFAIT, the inception of the North American Free Trade Agreement (NAFTA) has since strengthened Canada’s trade profile and improved the continental trading relationship. Trade in goods and services more than doubled from 1993 – 2007 among NAFTA signatories<!–[if supportFields]> CITATION For08 \n \l 1033 <![endif]–> (DFAIT 2008)<!–[if supportFields]><![endif]–>. NAFTA deals with rules of origin, government procurement, investment and services, intellectual property, and dispute settlement procedures. Accordingly, the deal has facilitated consistent growth of continental trade. In fact Canada’s trade with her North American partners reached $598 billion in 2007; trade with Mexico has quadrupled with total trade over $22 billion and trade in services valued over $1.2 billion <!–[if supportFields]> CITATION For08 \n \l 1033 <![endif]–>(DFAIT 2008)<!–[if supportFields]><![endif]–>.

Because of the gains made by NAFTA it would be beneficial for Canada to further investigate the possibilities of free trade with the European Union. The population of the EU exceeds five-hundred million, which represents a worthy market for better market access. In fact this has been a priority of the Stephen Harper government who has signed the European Free Trade Agreement in and has finalized Air Agreements with many nations throughout Europe <!–[if supportFields]> CITATION Can071 \l 1033 <![endif]–>(EC and Govt of Canada 2007)<!–[if supportFields]><![endif]–>.

In terms of trade priorities, Canada should focus on enhancing their current competencies. By offering favourable investment opportunities in major export industries related to EU-trade, Canada could fully take advantage of any economic partnership. Exports such as: precious stones, nickel, machines, inorganic chemicals, aircraft and spacecraft are the sectors that stand to gain most from increased trade relations.

However, in approaching closer economic partnership Canada should be cautious of open liberalization. During both the NAFTA and WTO Uruguay negotiations, Canada was pursued exemptions and exclusions on government procurement and financial services. NAFTA exclusions included goods, services, and construction. Canada was successful in having research and development, health and social services, utilities, communications, education and training, and financial services excluded from the agreement. In the WTO framework under the Government Procurement Agreement (GPA) Canada was successful in limiting foreign access to government contracts – in the sub-federal context and in so far as not granting equal status of foreign suppliers. Will Canada pursue similar interests in negotiations with the EU?

According to an e-brief paper released by the C.D. Howe Institute free trade agreements (FTA) can be tools to pursue foreign policy goals and may result in raised tariffs for nations outside of bilateral agreements <!–[if supportFields]> CITATION Adl08 \l 1033 <![endif]–>(Adler 2008)<!–[if supportFields]><![endif]–>. The brief describes how FTAs actually contribute to the deterioration of the multilateral trading system by setting regional or national preference. Perhaps by pursuing comprehensive agreements instead of region specific agreements Canada would experience broader benefits in trade. Matthew Adler suggests that “Canadian tariff reductions during the Uruguay Round on goods included in NAFTA would have been approximately 1.0 percentage point larger had NAFTA not been in effect” <!–[if supportFields]> CITATION Adl08 \n \l 1033 <![endif]–>(Stumbling Forward 2008)<!–[if supportFields]><![endif]–>.

Saskatchewan’s Position

Together with the Western Economic Diversification, Saskatchewan has identified priority markets as North America, Latin America and Asia-Pacific. The goal of government involvement to facilitate trade will be through support of small and medium-size enterprises to participate in international development. Target sectors include information and communication technology, life sciences, environment and alternative energies. <!–[if supportFields]> CITATION Can09 \l 1033 <![endif]–>(Canada-Saskatchewan Western Economic Partnership Agreement 2009)<!–[if supportFields]><![endif]–>

It is important to recognize that trade with the European Union is not a significant share of Saskatchewan’s export trade portfolio. In terms of imports, however, Denmark is the number two importer to Saskatchewan and represents eight percent of total <!–[if supportFields]> CITATION STE08 \l 1033 <![endif]–>(STEP 2008)<!–[if supportFields]><![endif]–>. The EU represents a large potential market for many of Saskatchewan’s industries involved in services, production and resource extraction. However, transportation remains the key issue in developing closer trade relations in trade in goods. Trade in services and energy represents a key priority for the Saskatchewan trade portfolio.

Science and technology is at the top of the list of trade priorities for both Canada and the EU. The Saskatchewan Research Council (SRC) is in charge of organizing research priorities for the province. One area of focus the agency concentrates on is energy – more specifically heavy oil recovery. Together with the Petroleum Technology Research Center the SRC provides royalty and tax incentives covering up to fifteen percent of total research costs <!–[if supportFields]> CITATION Int04 \l 1033 <![endif]–>(International Energy Agency 2004)<!–[if supportFields]><![endif]–>. Perhaps similar incentive programs could be devised to foster greater cooperation in the areas of agriculture, biomass and developing complementary regulatory programs.

Saskatchewan should leverage uranium deposits as a core-trade portfolio asset. The prominence of nuclear power-generating throughout Europe makes the EU an excellent market to export value-added uranium. Although uranium resource is under federal jurisdiction Saskatchewan should take a lead role to ensure control over resources – balancing a fair royalty regime with favourable investment opportunities for business.

Key Recommendations

- Address government involvement in the economy.

o Protect Crown Corporations and the ability for the public to develop regional economic clusters to serve regional interests while protecting supplies of natural resources

o Saskatchewan has public-interests in: research and innovation, telecom, insurance, power and natural gas generation and distribution. These may be viewed as barriers to trade with the EU

o Saskatchewan will have to define its position on organization such as the Canadian Wheat Board and Saskatchewan Wheat Pool

- The export-orientated Saskatchewan agriculture economy is a proponent of reducing tariffs.

o Average tariff levels on some agricultural and agri-food goods remains very high, these inhibit trade in animal products and some cereals

o Reduce tariffs on processed oils such as flax and canola

o If substantial gains are made through such an agreement will the terms be extended to all trade partners? Does this limit the willingness of Canadian officials to proceed with substantial reductions in tariffs and non-tariff barriers?

- Regulatory cooperation of sub-federal governments – as to harmonize the two jurisdictions of Saskatchewan with the European Union.

o Identify key areas of foreign ownership – determine acceptable levels in key areas of transport and energy

o Specifically address the non-tariff barriers of Canadian genetically modified organisms into the EU market – such as duplicative testing, certification and labeling

- Strengthen the research and education initiatives between leading European and Saskatchewan universities.

o Allow greater movement of researchers and students by providing access to health care and social assistance programs while abroad

o Establish guaranteed funding for collaborative projects, potential for a joint initiative on:

§ Agriculture, pharmaceuticals and veterinary medicine with the University of Saskatchewan

§ Science and technologies that deal with renewable energy and efficiencies, carbon capture and climate change with the University of Regina

- Will reducing barriers to trade in services truly have a positive impact for Canada?

o Is it doubtful that exports to the region will increase, as the market is already saturated with competitive intra-Europe trade?

- What are Saskatchewan’s financial commitments to such an economic partnership? Does the province have the capacity to oversee additional obligations?