The Trudeau government is in no hurry to negotiate a trade deal with the United Kingdom now the country has exited from the European Union.
Ottawa has adopted a cautious approach to working out a new deal with the UK, until more is known about the nature of its future trading relationship with the EU.
During the 11-month “transition period” post-Brexit, which runs to the end of December, the UK will continue being covered by the provisions of CETA (the Comprehensive Economic and Trade Agreement); Canada’s sweeping free trade deal with the European Union.
Officials from Ottawa and Brussels have engaged in preliminary talks about rolling over elements of CETA into a bilateral deal, but no timeline for the process has been established.
According to Susan le Jeune d’Allegeershecquem, Britain’s High Commissioner, “very much depends on how fast we can move ahead with the discussions with the EU, about our future relationship with the EU because that’s obviously a crucial element in whatever we work out with Canada.”
No Deal/Hard Brexit Implications
In the event the EU and Britain are unable to reach a deal before the end of the year, the UK will likely end up having to trade with the EU and other countries under World Trade Organization rules.
Economists predict that leaving the EU without a deal — a so-called “hard Brexit” — will have serious economic consequences for the UK. To help lessen the immediate blow to the economy, the Tory government has said it will offer tariff-free access to trading partners starting for one year in 2021. Such concessions would give Canada a negotiating advantage, adding more incentive for Ottawa to pursue a go-slow approach.
Prime Minister Justin Trudeau said last week that Canada had been “engaged with the United Kingdom over the past few years” on developing a transition plan. Trudeau told reporters he was “very confident” the UK would have “an orderly transition” from the EU with minimal disruption to Canadian trade and investment.
Toward a ‘Progressive’ Canada-UK Free Trade Agreement
Research undertaken with funding from national research councils in both countries recently examined whether the “progressive” nature of CETA would also be a good fit for a Canada-UK trade deal, or if perhaps other approaches should be considered which take greater account of public concerns about the social and environmental effects of trade agreements.
The resulting paper recommended the two countries negotiate a preferential trade agreement “with strong environmental and labour provisions.” Such a PTA should include “an independent enforcement body or explicit targets for the parties to achieve within the commitments of the trade agreement,” the report states.
The authors note that with the scope of trade agreements progressively expanding, PTAs “have become attractive places to negotiate non-trade rules in exchange for market access because they can link non-trade policy objectives within increasingly ‘judicialized’ treaties.”
- The UK is Canada’s third largest export market worth $12.6 billion, while Canada is the UK’s eighth biggest export market outside the EU.
- The UK is by far Canada’s most important commercial partner in Europe and the country’s fifth largest globally.
- Two way merchandise trade in 2018, reached $25.51 billion, with Canada running a surplus of more than $7 billion.
- Under CETA, tariffs have been eliminated on 98% of all goods traded between Canada and the UK.
- In 2018 Canada (2%) was the tenth largest partner for EU exports of goods and the twelfth largest partner for EU imports of goods (2%).
Need More Information?
The Government of Canada’s Trade Commissioner Service has provided an extremely helpful summary covering Brexit and trade negotiations between the UK and EU. Included is a checklist of important aspects for Canadian companies to consider.