* Talks launched in 2009 were due to finish last November
* An agreement could generate $28 bln a year in new income
* EU-Canada deal would also help shape EU-U.S. talks
By Robin Emmott and David Ljunggren
BRUSSELS/OTTAWA, April 22 Talks to wrap up a
multi-billion-dollar free trade deal between Canada and Europe
have stalled, diplomats said, raising concerns the agreement
could be put on hold as Brussels switches its attention to a
much bigger pact with the United States.
The Ottawa-Brussels negotiations to open up access to each
others' economies were launched in 2009, and were originally
presented as a straightforward bid to reinvigorate growth and
generate around $28 billion in trade and new business a year.
But diplomats and officials told Reuters wrangling over the
amount of beef Canada will be able to export to the EU, and EU
demands for greater ability to bid for Canadian government
contracts, are bedevilling the final stages of the agreement.
"This was supposed to be done in November, then we said
February, but now there's no clarity ... No one wants to walk
away from this, but it could be put on ice if things remain
stuck for a prolonged period," said an EU diplomat.
An EU agreement with Canada would be its first with a member
of the G7 club of major economies. It would also be one of a new
generation of deals that not only remove import tariffs but also
harmonise rules on how companies do business across borders.
The European Commission's negotiating teams and the EU
diplomats who shape such pacts already often work into the small
hours and need Canada out of the way to focus on the biggest of
the new deals they are facing, with the United States.
"Everyone in Brussels is shifting efforts and attention to
the United States ... The challenge lies in maintaining the
political momentum," said Adrian van den Hoven, a director at
the EU's biggest industry lobby Business Europe.
Any failure of the Canadian deal could have an impact on the
U.S. negotiations, due to start in July. Brussels officials were
hoping to use the Ottawa accord to show Washington they were
serious about opening up their sensitive agricultural markets to
a large, developed economy.
An EU-U.S. trade deal, which would encompass half the
world's economy and a third of global trade, could increase EU
economic output by 65 billion euros ($85 billion) a year,
according to a European Commission estimate.
TUSSLE OVER BEEF
Diplomats say much of the EU-Canada deal is agreed, and at
the heart of the final dispute is a Canadian demand to be able
to export up to 100,000 tonnes of beef to the EU every year.
Canadian beef exports are effectively blocked by the EU at
present because they contain hormones. Ottawa argues it needs a
large quota to make production of hormone-free beef for Europe
Irish and French farmers are unhappy with that, and the EU
has offered a much lower quota. That means both sides have to
seek a compromise, especially as Brussels wants to leave quota
space for the beef the United States will seek to export under
its free-trade deal.
In return for opening up to Canadian beef, German and French
companies want to be able to bid for government contracts in the
urban transport sector, which would challenge Canadian rail car
builder Bombardier's dominant domestic position.
The extent of the discord became evident in February, when
EU trade chief Karel De Gucht flew to Canada to shake hands on
the deal with Canada's Trade Minister Ed Fast.
According to people familiar with the exchanges, Fast was
unable to agree on the deal because he did not have the
authority to do so from his prime minister, Stephen Harper.
"De Gucht was ready to sign a deal when he came over, but
the Canadians weren't prepared. They were nowhere near ready,"
said one EU diplomat.
Harper has taken a close interest in the Canada-EU talks and
one person close to the talks said he had covered one document
with handwritten suggestions on how negotiators could proceed.
But analysts say he needs more time to sell a deal to his
electorate, especially in Quebec, where Bombardier has its base.
"Harper and the government is recognising they are going to
have to make some sacrifices and spend some political capital to
close this," said one Canadian source close to the talks.
Asked about the state of play, a spokesman for Fast said
negotiations were continuing and a deal would be signed when
both sides were ready.
"Harper has to add his political weight to get an
agreement," said another person close to the talks. "The best
scenario would be for both sides to sign the deal at the G8
summit in Northern Ireland in June, but there's no guarantee."