How Canada Can Save The Best Of CETA With A UK Trade Deal

Published by Andrew Lilico - The Financial Post

In August, the French and German governments proclaimed the Transatlantic Trade and Investment Partnership — the EU-U.S. deal known as TTIP — dead.

Talks have halted between Canada and the EU's latest trade deal (photo: The Canadian Press)

After voters in the Netherlands rejected an EU-Ukraine trade pact in a referendum this year, the Dutch government says it cannot see itself ratifying the deal, meaning that’s likely dead too.

And, as of Friday, talks between Canada and the EU over, CETA, the Comprehensive Economic and Trade Agreement, have collapsed.

Much attention has focused on the role of the Walloon parliament in Belgium for delivering the apparent coup de grâce to CETA, but in truth the Walloons weren’t the only objectors. CETA got to the stage where it required ratification by the Walloons precisely because its provisions were controversial enough, in various parts of Europe, that it was decided that not only the European Council and European parliament had to approve it, but also every relevant chamber in every member state.

In some EU countries there were concerns about CETA’s investor-state dispute settlement provisions, which — much like similar controversial provisions in TTIP — would allow corporations to sue governments for discriminating against foreign businesses.

Romania and Bulgaria, on the other hand, had threatened to veto CETA over Canadian restrictions on visas for Romanian and Bulgarian citizens.

Perhaps CETA might yet be salvaged. There has been a great deal of political capital invested in it and the Canadian government has rightly pointed out that the EU’s credibility as a negotiating partner is at stake. If the EU can’t even agree a trade deal with a country as “nice and as patient” as Canada — to use trade minister Chrystia Freeland’s words after she walked out of the talks Friday in frustration— who else would waste years hammering out a deal only to risk having it rejected by some obscure European regional parliament?



The EU has been very unsuccessful at closing international trade deals. It is very hard to craft a deal that satisfies 28 different sets of interests. Fortunately for Canada, much of the value of CETA lay in the Canada-U.K. part of the deal. It is perhaps an exaggeration to call CETA a Canada-U.K. deal with a few bells and whistles (and obstacles) added to accommodate the rest of the EU. But it’s only a modest exaggeration.

Some 42 per cent of Canadian exports to the EU are to the U.K. By comparison, the second-largest destination for Canadian exports in the EU is Germany, a market worth less than a quarter of the U.K.’s market to Canadian exporters.

The British government estimated that Canadian exports to the U.K. would increase by 15 per cent as a result of CETA, while British exports to Canada would increase by 29 per cent — well worth it for both.

But the U.K. is leaving the EU. So even if the EU now cannot complete CETA, the U.K. could have the same deal ready to commence on the day Brexit becomes official. Conversely, even in the unlikely event the EU does now manage to resurrect CETA, a significant part of its value to Canada will lapse without the U.K. being part of it. A “CUKTA” deal with the U.K. will be easier and quicker.

Andrew Lilico is a key supporter of CANZUK free movement (photo: Citywire)

Given the complexities involved in negotiating such deals, it might well be better for both Canada and the U.K. just to agree to enact virtually word-for-word what both countries had agreed to in backing CETA, rather than restarting a years-long process. But in due course it might be worth revisiting certain provisions and lacunae, tweaking them to better suit this particular bilateral arrangement. We might remove certain labour restrictions Canada agreed to, that were demanded by other EU countries but are not necessarily a priority for the U.K. We might add in extra access to the U.K. for Canada’s financial services sector. Having such a deal come into force on the day of Brexit, in early 2019, wouldn’t do any harm to Trudeau’s chances in the 2019 Canadian federal election, either.

It’s also worth pondering how a CUKTA might be extended into other deals. Hillary Clinton says the TPP is dead. But as president, she would not likely want to appear completely anti-trade. Both a potential Clinton administration, and the U.K. government, might be interested in a quick deal to extend NAFTA to Britain. Or, a Canada-U.K. deal might someday be expanded to include the U.S.

Alternatively, or perhaps also, we should bear in mind that other countries have also expressed an eagerness to do an early deal with the U.K, notably Australia. Given their natural affinities, a trade agreement between Canada, Australia and the U.K. (perhaps also including New Zealand — making the whole set a “CANZUK”) should be doable. That might also be combined with other schemes, such as granting an automatic right to the citizens of these four states to live and work in each other’s countries.

The EU has got itself to a place where it finds it very difficult to make any international trade agreements. Even if CETA is ultimately salvaged, without the U.K. in Europe, much of the deal’s value was lost anyway. Canada already has in CETA a template to strike an early (and easy) deal with the U.K. that could benefit both in the post-Brexit era. CETA may be dead. But, if so, long live CUKTA or CANZUK!

Dr. Andrew Lilico, based in London, is executive director and principal of Europe Economics and a leading contributor for CANZUK Uniting, a website promoting comment and analysis for a CANZUK union.