Canada Seeks to Avoid Brexit Cliff-Edge With Trade Deal Talks

(Bloomberg) — Canada wants to avoid a Brexit cliff-edge too.

The government is pushing for its trade deal with Europe to be ratified by Britain before it leaves the European Union to secure the crucial agreement. It also has its eye on deeper relations with the U.K. once Brexit is complete.

Canada wants to preserve any preferential access that businesses or investors currently have, High Commissioner to the U.K. Janice Charette said in an interview from her office overlooking Trafalgar Square on March 20. “That’s the idea of avoiding some kind of a cliff-edge,” she said. Also, “we’ll be interested in seeing what we can do to enhance the bilateral arrangement” after the U.K. is out.

Prime Minister Theresa May will start formal divorce talks with the EU at the end of the month. While Britain can’t officially negotiate new trade accords until it has finished leaving, it has held preliminary discussions with several countries. The prospect of leaving the bloc without alternative arrangements in place is commonly referred to as the “cliff-edge,” which businesses say would be the most destructive outcome.

Canada’s efforts to remove trade barriers with the Comprehensive Economic and Trade Agreement come at a time when protectionist sentiment is increasing globally. U.S. President Donald Trump has been ratcheting up rhetoric against free trade, while Group of 20 finance chiefs removed a line to “resist all forms of protectionism” in their latest communique.

Comparing Notes

When it comes to Trump, “we are their closest neighbor, so people are curious to see if we have any insights to share,” Charette said. “We’re all comparing notes in terms of how best to make sure that the interests of our countries are well understood.”

The CETA agreement could provide some guidance for modernizing the North American Free Trade Agreement, which Trump has pledged to renegotiate, Charette said.

Canada’s deal with Europe is set to boost trade with the EU by about a quarter, according to government estimates. The U.K. is Canada’s biggest partner within the bloc, and Charette sees further opportunities.

“If you look at just one-to-one, the area of financial services is huge for the U.K., and that will be of interest for Canada” for going “beyond what is in the CETA agreement today,” Charette said. Trade in services more broadly could be improved and the countries could discuss how to build on CETA arrangements for intra-company transfers or the movement of professionals, she said.

Trade Talks

Technical discussions to preserve CETA with the U.K. after Brexit have begun. Francois-Philippe Champagne, appointed Canadian trade minister this year, has met with U.K. Trade Secretary Liam Fox several times already, Charette said.

CETA will be enacted provisionally later this year, reducing tariffs on products like maple syrup and fresh Canadian lobster. Other parts of the agreement, like investor-state dispute settlements, will only come into effect with the consent of domestic parliaments. “The sooner that happens the better, because the longer that goes on, the bigger the chance is that you have change in political leadership,” she said.

She also stressed that Canada’s experience negotiating with Britain in the face of Brexit doesn’t mean it will be so easy for everyone.

“There’s a difference between countries now that have a trade agreement with the EU and countries that don’t,” Charette said. “If both countries put a priority on it, and they have the capacity, they can move quickly — but that’s a lot of countries to deal with, and you can’t do them all at the same time.”

–With assistance from Josh Wingrove

©2017 Bloomberg L.P.

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