Understanding the Current Trade Landscape
The article from over a year ago suggests that Canada was hesitant to roll over the Canada-European Union (Canada-EU) Comprehensive Economic and Trade Agreement (CETA) for the United Kingdom (UK) after Brexit due to the UK's announced zero-tariff policy on almost all products of interest to Canada. This policy position essentially meant that Canada saw no need to maintain the agreement in its current form as it already had favorable trade terms. However, following the departure of Theresa May and the ascension of Boris Johnson, the situation has evolved significantly.
Changes in UK Tariffs and Canada's Perspective
The Boris Johnson government initially stated that UK tariffs would remain consistent with the EU Common External Tariff. Later, they announced a reduction and simplification of some tariffs. This shift prompted Canada to reassess the situation. For Canada, it is crucial to determine if these new tariffs align with their interests and if there are opportunities for further negotiation without compromising market openness.
Canada's Favorable Trade Balance
Despite these changes, Canada currently enjoys a very positive trade balance with the UK. Canada exports approximately twice as much to the UK compared to imports, making this one of the most favorable relationships Canada has with EU member states. Prior to the implementation of CETA, Canada generally observed a trade deficit with many EU countries, indicating the trade benefits derived from the UK.
The Uncertainty of Negotiating a New FTA
The possibility of negotiating a new Free Trade Agreement (FTA) with the UK is uncertain. The top 25 Canadian exports are already facing minimal tariffs. However, there is some interest in exploring the possibility of a new FTA, as shown in the Canadian report. This indicates that while the current situation is beneficial, there might be room for further improvement.
UK's Nibbler Status Post-Brexit
The Brexit narrative often emphasized how the UK, as an independent entity, could be more nimble in negotiations and better represent its priorities without having to consider the needs of other countries involved in EU negotiations. However, the UK's limited competence in international affairs and negotiation skills often mean that any trade deals present a 'ticked box' exercise rather than substantive progress. The rush to roll over trade deals without thorough review or consideration is indicative of this.
Switzerland as a Cautionary Tale
The example of Switzerland, which has managed to negotiate favorable trade agreements despite not being an EU member, shows that a nimble negotiating position is certainly possible. However, the UK's rush to secure deals is often driven more by political and symbolic gestures than by genuine strategic benefits.
Concluding Thoughts
In conclusion, the decision to roll over trade deals post-Brexit is not a straightforward one for Canada. A thorough reassessment of the new UK tariffs and the overall market dynamics is necessary. While Canada benefits from the current trade balance with the UK, there are always opportunities for improvement. A new FTA or renegotiation could enhance the relationship, provided it aligns with Canada's strategic interests. The UK's position as a nimble negotiator offers potential, but the trade deals should be assessed critically to ensure mutual benefits.