What is a Canada-style trade deal?

What is a Canada-style trade deal?

Wednesday, September 26, 2018

Prime Minister Theresa May has argued that a no-deal Brexit would be better for the UK than a Canada-style deal, saying that the latter deal would risk breaking up the UK.

This came on Tuesday after Mrs May faced a week of rejection from European leaders on her Chequers plan for Brexit, including the President of the European Council Donald Tusk who said her proposals “will not work”.

Her own Conservative MPs added to criticism as the pro-Brexit European Research Group chairman Jacob Rees-Mogg urged the Prime Minister to seek a “basic” free trade agreement also known as “Canada Plus”.

But, what does Canada’s trade deal with the European Union look like? And how would it work for the UK?

 

When was it signed?

Members of the European Parliament vote on the contested CETA in February 2017, after facing down protests

The Canada free trade deal is known as CETA, or the EU-Canada Comprehensive Economic and Trade Agreement, and official came into force last year after taking seven years to agree.

This included five years of negotiations followed by two years of ratification across European countries and in Canada.

 

How does trade with the EU work?

Canada's Justin Trudeau, France's Emmanuel Macron and Theresa May at the UN General Assembly on Wednesday

CETA removes 99% of customs duties on European exports to Canada and Canadian exports to the EU while, after seven years, all tariffs on industrial products will disappear.

Most tariffs on agricultural products will also be removed, along with barriers to investment for EU investors in Canada and allowing EU companies to bid for public procurement contracts in Canada.

 

How does trade with the rest of the world work?

“Canada’s ability to negotiate its own deal is not constrained by its deal with the EU”, according to the Institute for Government.

 

What is not covered?

As Canada does not follow single market rules, it does face some barriers.

Canadian goods have checks on them at the border to ensure they meet regulatory standards, and there is more paperwork.

The EU can also choose to introduce future barriers to Canadian goods if it wanted to, and Canada can do the same.

Canada has some access to the EU services market but some sectors have been explicitly excluded. According to the Institute for Government, hundreds of sectors are excluded to some degree.

As an example, Canadian financial services do not have full access to the EU market.

This is different to other countries such as Switzerland or Norway, who have accepted some obligations such free movement or money, in order for almost full access to the EU single market.

 

What are the rules?

CETA is governed by a joint committee of EU and Canadian representatives, specialist sub-committees, and a specialist body that allows regulators to share information.

Canada also does not have to align its laws with the EU so there is no need for Canada to follow most European rules such as the freedom of movement.

CETA does not require Canada to pay into the EU budget.

 

Would it work for the UK?

Jacob Rees-Mogg has publicly urged the Prime Minister to negotiate a “basic” trade deal from the EU, in the form of a Canada-style deal.

On Monday, Mr Rees-Mogg, who leads the European Research Group, said: "So much of what hear about these negotiations has been about managing decline, has been about how you have the least bad Brexit, this is about how you can have a fantastic Brexit that sets us up for the next generation and ensures our prosperity.

"This has been offered to us by the Commission, they have offered us the best trade deal they have ever done with any country ever in the world, so if you want to call it Canada plus, or super Canada or supercalifragilisticexpialidocious Canada, that is what is being aimed and it’s being offered."

However on Tuesday, Mrs May told reporters on her flight to the UN’s General Assembly that a no-deal was better than a “bad deal” like a Canada-style deal which could “break up the UK”.

She said: “First of all, I’ve always said no deal is better than a bad deal. I think a bad deal will be a deal, for example, that broke up the United Kingdom. We want to maintain the unity of the United Kingdom.

“What we’ve put on the table is a good deal. It’s a deal that retains the unity of the United Kingdom, our constitutional integrity.

“ It’s a deal which provides for no hard border between Northern Ireland and Ireland, protects jobs and enables us to have a good trade relationship with Europe and good trade relationships with the rest of the world.”

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