Brexit uncertainty is no more, following the election of Boris Johnson as prime minister of the United Kingdom with the largest Conservative majority since 1987. The U.K.’s withdrawal agreement with the European Union will be official on midnight, Jan. 31.
But that isn’t the end of the story.
By December 2020, the end of the transition period during which trade rules between the U.K. and EU remain the same, a new trade agreement must be in place. At the same time, the recently implemented CETA (Comprehensive Economic and Trade Agreement) between the EU and Canada will no longer apply to trade with the U.K.
In 2018, Canadian Prime Minister Justin Trudeau’s trade negotiating team held back on new trade talks with the U.K. after learning that, in the event of a no-deal exit with the EU, the U.K. would remove virtually all import tariffs. This would have made the market significantly more accessible for Canada and require no reciprocal action or concessions.
At the time, Canada’s decision to hold back on trade talks made sense. But now that a deal exists for the U.K. to leave the EU, further indecision can only be a bad thing.
Despite the fact Johnson has a deal with the EU in place, Canadian leaders have apparently not made new trade talks a priority.
But that hasn’t put off U.S. President Donald Trump, who has made it very clear that the U.S. is willing to do a deal with the U.K. Talks are ongoing.
A new U.S.-U.K. deal could include concessions that make regulatory alignment with the European Union impossible. For instance, if the United States demanded access for chlorinated chicken products to the U.K. market, that could drastically affect the nature of a deal between the EU and the U.K., since the EU doesn’t allow the trade of such products.
The threat of U.S.-U.K. negotiations could force the EU to backtrack on chief negotiator Michel Barnier’s claim that a trade deal won’t be done by 2021. To maintain the closest possible trading partnership, the EU might be rushed into making a new deal before Trump gets in there.
Alternatively, Trump’s intervention may result in improved trade with the U.S. and a shift toward a basic free-trade agreement with the EU, with less focus on regulatory alignment.
So what does this mean for Canada?
It all depends on whether the Canadian government moves to make new arrangements with the U.K. CETA won’t necessarily roll over at the end of 2020, especially if the U.K. favours a new relationship with the U.S. over continued alignment with the EU.
There’s no good reason for Canada to withhold from trade discussions. If anything, Trudeau is failing Canadians if he doesn’t step up to save what could be a continued source of positive trade for Canada.
Since 2017, U.K. exports of goods to Canada have increased by 13.7 per cent. Canadian exports to the U.K. were worth US$13.6 billion in 2017 and US$12.6 billion in 2018. What argument could the Canadian government have for continuing to withhold from talks?
Canada could also be missing an opportunity to form trade agreements with the U.K. for products that the EU doesn’t accept under the current CETA arrangement. Biotech has been a source of contention during CETA negotiations with the E.U., which refuses to loosen up strict rules on importing genetically-modified foods. If the U.K. can escape the regulatory barriers blocking trade with the U.S., that can a work in Canada’s favour.
But Canada needs to begin negotiations now, before the European Union can destroy any such possibility.
The future of CETA, at least between the U.K. and Canada, is uncertain. Canada needs to initiate talks, as the United States has, to build on a strong trading relationship the U.K. and unlock even more benefits.
Jack Buckby is a research associate with the Frontier Centre for Public Policy and a British author and researcher, with experience working in English, American, Canadian and Polish media. His last book, Architects of Betrayal, explores the disastrous European Union exit withdrawal negotiations under the leadership of former prime minister Theresa May.
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