OTTAWA/REUTERS / Canada and the European Union will need to put in quite a lot of hard work to settle several key differences in talks on a proposed free trade deal, according to senior officials.

Recent talks, the ninth round to date, are aimed at finalizing a deal by next year. Both sides said significant progress was made in many areas but there are still disagreements on issues such as investment protection, intellectual property, access for agricultural goods, and opening up local and national procurement markets.

One official said discussions have solved 80 per cent of the areas and negotiators are optimistic about resolving the remaining ones, but it won t be easy.

What is left to do is probably the hardest part but also the most valuable and it will require quite a lot of hard work, said the official.

Negotiators from both sides said the differences stemmed in part from a shared determination to lift tariffs and liberalize trade in areas they had not tackled in previous bilateral deals.

Canada is keen to diversify its exports away from the U.S., and a pact with Europe would be the biggest since it signed 1994 s landmark North American Free Trade Agreement with the United States and Mexico. Ottawa says a treaty with Europe would increase two-way trade by 20 per cent. Last year, bilateral trade in goods between Europe and Canada was worth $77 billion, far shy of the Canada-U. S. total of $556 billion.

One sticking point is Canada s insistence on protecting supply management by retaining stiff tariffs on imports.

We are interested in some of the sectors under supply management in Canada, said one official. If they re not on offer at the end of these negotiations, there will be things that are not on offer on our side.

Ottawa is keenly aware of critics who complain that opening up the Canadian procurement market could result in too much power being given to foreign firms.

As we enter the next phase of negotiations, our government will continue to vigorously defend Canadian interests to ensure any agreement we conclude benefits Canadian businesses, workers and their families, said Trade Minister Ed Fast.

Fast said there are particularly promising opportunities for Canadian firms in the giant EU procurement market, worth some $2.4 trillion a year.

Speaking earlier this week, officials said the European side was unhappy with Ottawa s stance on opening up the procurement market and also wanted to see more progress on allowing foreign investment in the heavily restricted Canadian telecommunications market.

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What is left to do is probably the hardest part but also the most valuable and it will require quite a lot of hard work.