A large amount of work remains to be done on a proposed free trade treaty between Canada and the European Union, which is supposed to be concluded by the end of the year, a senior Canadian official was quoted as saying on Friday.

Canada, keen to diversify its exports away from the United States, says a deal with the European Union would increase two-way trade by 20 per cent.

Ottawa wants to conclude negotiations by the end of 2012 but the two sides have yet to settle contentious issues such as access for agricultural goods, opening up procurement markets and the extension of pharmaceutical patents.

"There is a large amount of work that needs to be done," chief Canadian negotiator Steve Verheul told civil society activists in a phone briefing, adding that the two sides were in constant contact.

Verheul’s comments were passed on to Reuters by Stuart Trew of the left-leaning Council of Canadians, which opposes the proposed deal.

University of Ottawa law professor Michael Geist was also on the call and quoted Verheul as saying trade ministers from both sides planned to meet in Europe in mid-November.

Canada and the EU — which opened negotiations on the treaty in 2009 — have always said that the most tricky issues would be left to politicians to sort out.

"The pressure to conclude the agreement this year is readily apparent. There appears to be a bit of a disconnect, however, between the aggressive timeline and the number of outstanding issues," Geist told Reuters.

For Canada, the pact would be the biggest since it signed the landmark North American Free Trade Agreement with the United States and Mexico in 1994.

The United States is by far Canada’s biggest trading partner and takes around 75 per cent of all Canadian exports.

"We are now down to focused sessions on the remaining issues. Solutions to the remaining issues are being actively explored," said Adam Taylor, a spokesman for Canada’s International Trade Minister Ed Fast.

One challenging issue is the EU’s demand that Canada extend the patent protection of drugs produced in the EU, which the Canadian generic pharmaceutical industry says would add about C$2.8 billion annually to prescription drug costs.

According to a post on Geist’s blog, Verheul said the two sides had not even begun to discuss the patent issue.

"Steep tariff"

Another obstacle is Canada’s insistence on protecting its agricultural sector through a system of supply management, which sets producer quotas and prices on farm commodities such as milk and poultry, and slaps stiff tariffs on imports.

Trew quoted Verheul as saying Canada was pressing the EU to take more of its beef and pork while the EU wanted more access for dairy products. Neither demand has been resolved yet.

"Reaching an agreement with the EU that will eliminate the steep beef tariff and any quotas will help every link in the beef production chain in Manitoba," Ray Armbruster, president of Manitoba Beef Producers, said in a separate release Friday.

About 50 per cent of MBP members’ production is exported, the group said, and "new and stable market access into the EU is needed in order to help us build the infrastructure necessary to support the growth and development of beef production in Manitoba."

Canada’s Public Safety Minister Vic Toews, in a separate release Friday to Manitoba media, noted agriculture is that province’s largest exporting sector to the EU, shipping about $154 million in agricultural products on average each year between 2009 and 2011.

Tariffs on "key Manitoba exports" to the EU, such as seed, including forage plants (2.5 per cent), rye (up to 93 euros per tonne) and oats (89 euros per tonne), would disappear in an "ambitious" Canada-EU trade pact, Toews wrote.

Fast added there are particularly promising opportunities for Canadian firms in the giant EU procurement market, which they say is worth $2.4 trillion a year.

Critics such as Trew fear that opening up trade with the EU could spell foreign domination of the Canadian provincial procurement market, which has some restrictions.

— David Ljunggren writes from Ottawa as Reuters’ national political correspondent for Canada. Includes files from AGCanada.com Network staff.