The U.K. and Canada are on track to forge a bilateral agreement that would immediately take effect should Britain be forced to leave the European Union without a deal on March 29, the U.K.’s high commissioner to Canada says.
“We’ve made a huge amount of progress talking about what that agreement might look like and those informal discussions have been conducted on the basis that we both know this is incredibly important to us,” High Commissioner Susan le Jeune d’Allegeershecque, the U.K.’s top diplomat in Ottawa, said in an interview. “The U.K. is the biggest trading partner Canada has within the EU and we need to preserve those benefits for businesses on both sides of the Atlantic.”
The landslide vote against Prime Minister Theresa May’s Brexit plan has upped the chances of a “no deal” Brexit that would see the U.K. abruptly cut out of the EU and, by extension, Canada’s newly minted trade deal with Europe, the Comprehensive Economic and Trade Agreement (CETA).
Though a hard Brexit is still not a done deal, the increasing possibility of that outcome ups the pressure on Canada to make alternative arrangements that would maintain trade flows with its most important European trading partner, analysts say. The U.K. receives 40 per cent of Canada’s exports to Europe and is its third-largest export market overall. It is also Canada’s second largest destination for foreign direct investment after the United States.
Informal talks between Canada and the U.K. have been ongoing “for some time now” and are focused on transposing the terms of the current CETA into an alternative arrangement that would maintain preferential market access, d’Allegeershecque said.
In the fall of 2017, Prime Minister Justin Trudeau and May told reporters they had agreed to a “seamless” transition from CETA after the U.K. leaves the EU.
“We see huge opportunities here and we think CETA opened up a lot of doors,” said d’Allegeershecque. Canada is currently the U.K.’s 17th-largest trading partner.
A bilateral agreement would require legislation to be passed in both Canada and the U.K. by March 29, a process that “I think will be very difficult,” said Armand de Mestral, a senior fellow at the Centre for International Governance Innovation and professor emeritus of international law at McGill University in Montreal.
“Has a bill been drafted?” he said. “Is the agreement fully negotiated? Trudeau has said he wants a seamless transition but that’s easier said than done and the closer you get to that March 29 deadline, the harder it is to put together.”
The U.K.’s high commissioner said she is “as confident as I can be,” that the deal will be ready in time.
“On both sides of the Atlantic we know what we need to do to make sure this is in place,” she said, adding it would only come into play in the case of a hard Brexit in March.
When we talk about trade diversification, the U.K. (is) very important to us, so this whole process is quite consequential
Mark Agnew, director, international trade policy, Canadian Chamber of Commerce
If Britain manages to negotiate a deal that includes an orderly transition period, trade would continue under the terms of CETA until Britain has formally left the bloc. At this point the U.K. would be free to negotiate a new free trade agreement with Canada that would include elements “we both might like,” she said.
In a statement, a spokesperson for Global Affairs Canada said Canada and the U.K. are having “technical discussions on ways to maintain preferential market access in the case of a ‘no-deal’ Brexit, while recognizing the U.K.’s lack of jurisdiction to negotiate an FTA while it remains a member of the EU.”
The overwhelming rejection of May’s deal has thrown the Brexit process into disarray, with little certainty as to whether it will push the U.K. into a hard break with the EU, trigger an election or lead to a repeat referendum that could overturn the leave mandate.
May has indicated that she will appeal to the European Union in Brussels for more concessions — though the bloc has so far refused further negotiations. Lawmakers will vote Wednesday on a no-confidence motion in her government.
“When we talk about trade diversification, the U.K. (is) very important to us, so this whole process is quite consequential,” said Mark Agnew, director of international trade policy for the Canadian Chamber of Commerce.
The main concerns he has heard from the business community have come from goods-exporting firms worried about how tariffs might change and from Canadian companies using the U.K. as a base for their European operations, he said.
While he expects Trudeau’s majority government to be able to push through any legislation on a deal, passage in the U.K. could present more challenges, he added.
“I don’t think we should underestimate the time this is going to take,” he said. “March 29 is moving quickly toward us on the calendar.”