It might look appealing to Brexiteers, but requires patience
By M.D. | OTTAWA
BREXIT backers must now put flesh on the bones of their post-EU plans, including new arrangements for trade. During the campaign, Boris Johnson said Britain could follow Canada’s example and strike free trade deals with the rest of the world while maintaining control of its borders. But what is the Canadian model for trade deals and would it work for Britain?
Canada has 15 free trade deals in place. The largest and most important to the country is the North American Free Trade Agreement (NAFTA) between Canada, Mexico and the United States, which came into force on January 1st 1994. Canada has also negotiated but not signed a pact with the EU that went further than NAFTA in some areas, such as government procurement at the sub-national level, which will allow firms from both sides to bid for many more contracts, and called for speedier removal of tariffs. The Canada-EU Trade Agreement (CETA) grants Canada limited access to Europe’s single market, though its future is complicated by Brexit.
The CETA shares common elements with NAFTA. They are trade agreements rather than customs unions. Members retain separate external tariffs and rely on rules of origin to determine whether an item is eligible for preferential treatment. Both call for almost all tariffs to be eliminated, allowing the free flow of goods and services, but crucially not of people and capital. NAFTA has a skeletal secretariat to resolve disputes. The work is done by tribunals that are set up as needed. The NAFTA partners, who meet this week in Ottawa, have attempted without much success over the years to harmonise regulations, which remain the purview of individual states. There is no army of bureaucrats to set common standards. At the 2007 summit the leaders discussed a standardised label for jelly beans.
Should Britain decide to copy the Canadian model with the EU it would gain the independence in policymaking and border-control that Brexiteers desire; it would even be able to pocket its financial contribution to the EU budget. But the Canadian model also implies that there would no longer be unfettered freedom of movement for people and capital, and Britain would not have a say on the rules of the single market. It would also face a new risk of being blindsided at the border—as Canada and Mexico were following the September 11th attacks—by obstacles erected in the name of security, which raise the costs of moving goods. There is one final element the Canadian model requires: patience. Talks about CETA began in 2007 and the deal is not yet done. Britain's economy may not have that much time.
