Brexiteers cite Canada as blueprint for breakthrough

Ceta contains many benefits for the EU and Canada, but balanceof positives and negatives would be very different for UK, writes Andrew Hammond.

Brexiteers cite Canada as blueprint for breakthrough

Ceta contains many benefits for the EU and Canada, but balanceof positives and negatives would be very different for UK, writes Andrew Hammond.

The EU and Canada begin a two-day summit in Montreal today. Centre stage in the discussion will be the landmark bilateral trade agreement which many Brexiteers believe is the best template for a future EU-UK deal, despite the plethora of potential pitfalls for Britain.

The so-called Comprehensive Economic and Trade Agreement (Ceta), covering around a fifth of the global economy, took the best part of a decade to negotiate and was signed in October 2016.

It saw some 98% of all tariffs on goods traded between the two powers become duty free, and has been billed as “the most ambitious trade agreement the EU has ever concluded”.

Mosttariffs were removed when the deal came provisionally into force in 2017 with the key remaining step being full ratification which could potentially take several more years.

The EU has negotiated a wide range of external trade agreements for member states, but for many Brexiteers it is the ‘Canadian model’ that stands out.

Part of the reason for this is that, in their eyes, it would allow the UK to completely leave the Brussels-based club, including the customs union and single market, and allow London to do free trade deals with other countries.

However, glorified as Ceta is by these same Brexiteers, it would come with significant costs for Britain given the different starting positions of London (a member of the Brussels-based club for over four decades and embedded into many its structures) and Ottawa, vis a vis the EU.

Whereas Ceta represents a net level of integration between the EU and Canadian economies, a similar deal would represent a sharp break (or “hard Brexit”) between the UK and EU.

Moreover, Ceta does little to enable some key business sectors. Take the example of financial services, a huge part of the UK economy, which sees neither Canadian nor EU firms getting so-called passporting rights which would allow their firms sell their products in each other’s markets.

Ceta also does not eliminate border controls — although it does incentivise use of advanced electronic checking to expedite customs clearance.

A further potential challenge comes with the fact that a Canadian-style deal would end the UK’s preferential access to more than 50 markets outside Europe with which the EU has trade agreements.

While there would be the opportunity to renegotiate these bilaterally, there are no guarantees that London would obtain terms as good as those today, despite what Brexiteers say, as current UK-Japanese discussions indicate.

While Brexiteers also suggest that negotiating a Canadian-style deal would be relatively easy, this belies the challenges involved. Indeed, in 2016, after around seven years of negotiations, there was a near-complete breakdown of Ceta talks.

This came when the legislature in Wallonia — a region of Belgium with a population of around 3.5m — indicated to Canada that its opposition to key provisions of the proposed deal, were ‘red lines’.

What this exemplifies, on both economic and political fronts, is that all of the various alternative models to the UK’s membership of the EU — from a no-deal to harder Brexit like Canada, and softer Brexit like Norway — all involve key trade-offs.

And this is why the UK government has, since the Brexit referendum in 2016, found it so very hard to find a single alternative model, which can secure consent from other key parties, that comes close to providing the same balance of influence and advantages that Britain gets from its current status inside the EU.

For all the EU’s flaws, and it has many that need to be better tackled, the UK enjoys a uniquely positive position in the world’s largest political and economic union. For instance, London has all the benefits of the single market economic powerhouse but is not part of the eurozone; it has retained a budgetary rebate and ensured it cannot be outvoted by eurozone countries against UK interests.

And it is not part of the Schengen border-free area, which means it operates border controls with other EU member states.

The stark reality is that, while the nature of bilateral agreements with the EU vary, all have key disadvantages, including no full access to services (such as the financial sector) which accounts for 80% of the UK economy. Take the example of Norway, an example of a “softer Brexit” at the opposite pole to Canada, which would provide considerable continuing access to the single market.

Yet, in exchange, Oslo is a ‘rule taker’ rather than ‘rule maker’ being required to adhere to EU rules without having a vote on them as EU members such as the UK do now; it must accept free movement of people; make contributions to EU programmes and budgets; and do customs checks on goods crossing into the EU.

Taken overall, while Ceta contains many benefits for the EU and Canada, the balance of advantages and disadvantages would be very different for the UK.

For all the EU’s flaws, Britain now enjoys a uniquely positive position in what is the world’s largest political and economic union, and continued membership of a reformed EU would be a better option for the nation.

Andrew Hammond is an associate at LSE Ideas at the London School of Economics.

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