OTTAWA—The Ontario government will seek “full federal compensation” for provincial industries potentially harmed by the new Canada-Europe trade agreement, sources told the Star.

While Premier Kathleen Wynne’s administration is pleased with the provisional accord, which will increase access for Ontario companies to 500 million new European customers, the province has major concerns about the impact of the deal, according to Queen’s Park sources who have been apprised of the details of the accord.

The massive free-trade trade pact with Europe negotiated in secret by the federal Conservatives will shake up Ontarians’ lives for years, changing job prospects, consumer prices, business opportunities and the ability of Queen’s Park to boost the economy by favouring local contractors.

Prime Minister Stephen Harper is meeting with European Commission president Jose Manuel Barroso in Brussels Friday to work out approval in principle of the Comprehensive Economic and Trade Agreement (CETA).

Canadians can expect widespread changes from the pact, the biggest for Canada since the 1988 free trade deal with the United States. But details from the four years of negotiations are only now being released, and it may take months before the agreement is finalized.

The pact gives Canadian companies preferential access to the 28-country European Union. But this advantage comes at a price, and some Canadians want to know what the Harper government traded away in the negotiations.

Ontario has three major concerns, insiders said Thursday.

The increase in tonnage of European cheeses could adversely affect Ontario’s artisanal manufacturers so Queen’s Park would want “full compensation for our producers should they be impacted,” said an official who would only speak on condition of anonymity because the CETA details were not public until Friday.

As well, the province wants slower implementation of that aspect of the accord and would like Ottawa to bankroll a marketing fund for the province’s specialty cheese makers.

Similarly, Wynne’s government is concerned about the affect on Ontario wine and spirit producers.

Under the CETA deal, the current “ad valorem” arrangement — levies based on the value of the product – will be replaced by a flat fee tied to volume. So the fee on a 750 ml bottle of wine costing $100 would be the same as on one costing $10.

That could seriously hinder Ontario’s wine and spirits industry, so the province will seek compensation from Ottawa for any wineries and distilleries hurt by the new accord.

Finally, Ontario is troubled by a change that could hit the health budget.

The deal could include a two-year extension on the patents of some brand-name pharmaceuticals, and Queen’s Park is worried this could affect the province’s bottom line because it would increase drug costs.

While this would apply only to drugs that are delayed for introduction into the domestic market due to Health Canada approvals, Ontario is worried about the possible impact on the formulary.

“If it affects our bottom line we would look for full compensation from the federal government,” a provincial official said. A study by generic pharmaceutical makers put the annual extra cost to Ontario consumers and governments at $1.2 billion annually.

Ontario and the provinces’ large cities like Toronto may also have objections to a CETA measure expected to open up reciprocal bidding in Canada and the EU for billions of dollars in government procurement contracts. Elected leaders at the provincial and municipal level in Canada often favour local companies when handing out contracts as a way to strengthen the economy. But this practice could be partly wiped out by CETA.

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Also buried in the trade deal is expected to be an investor protection clause that will alarm some Canadians. These provisions would allow European corporations to sue governments in Canada if the business believes it is being treated unfairly (and vice-versa for Canadian firms).

“There is no compelling economic case for CETA, but we know the deal is full of unnecessary and costly changes to public policy, and even our ability to decide what kinds of policies we want,” said Maude Barlow, national chairperson of the Council of Canadians.

Corporate Canada sees the benefits of free trade with Europe as extensive, with opportunities to sell more manufactured goods such as cars, tap into the market for engineering and consulting services, and provide more beef, pork and seafood for European tables. The government says it will create up to 80,000 jobs and increase economic activity here by $12 billion a year.

“This is something that no other major economy in the world has except Canada,” Canadian Manufacturers and Exporters President Jay Myers told the Star.

But the deal is controversial. It could cost Canada more than 150,000 jobs, a study by Unifor economist Jim Stanford predicted.

Tariffs on most imports will be phased out, but tariffs are already low. It will be easier for Europeans to sell cars in Canada, for instance, but whether Mercedes and BMWs will go down in price is unknown, said trade lawyer Peter Clark, who added that luxury brands have their own market dynamics.

“You’re not going to sell more Louis Vuitton purses because they’re $150 cheaper,” he said.

Quebec's dairy producers are denouncing the federal government for offering the European cheese producers access to the Canadian market, which they believe will ultimately harm the domestic cheese industry.

“The concessions given to Europe will have an immediate negative economic impact on Quebec cheese and dairy production,” said Bruno Letendre, president of the Fédération des producteurs de lait du Québec.

But Denis Lebel, the federal minister responsible for Quebec, said the government would compensate any farmer who suffers as a result.

With files from Allan Woods, Dana Flavelle and Reuters

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