Canada not rushing to post-Brexit deal with Britain, as business urges calm

OTTAWA — The Trudeau government is heeding widespread calls to apply some British stiff-upper-lip resolve to the United Kingdom’s Friday exit from the European Union.

The advice from business groups stresses that Canada should not rush to negotiate a new trade deal with Britain, and to not be in a hurry to simply incorporate a made-in-London version of Canada’s current pact with the EU.

In other words, keep calm and carry on.

Despite the bluster and tears surrounding Friday’s Brexit, nothing essentially changes for the remainder of the year between Canada, Britain and the EU, says Brian Kingston, vice-president of the Business Council of Canada.

Until Dec. 31, Britain remains a member of the EU, and is still bound by the continent’s sweeping free trade deal with Canada on goods and services, known as the Comprehensive Economic and Trade Agreement, or CETA.

Canada and the EU have completed what has been billed as informal preliminary talks about rolling over elements of CETA into a bilateral deal, but no date for formal negotiations has been set.

“Any future trade agreement between Canada and the U.K. would be influenced by the U.K.-EU trade relationship, as well as any unilateral U.K. approaches,” said Ryan Nearing, a spokesman for International Trade Minister Mary Ng.

The British High Commissioner to Canada, Susan le Jeune d’Allegeershecque, said her country is now free to negotiate with whatever country it chooses, but formal talks with Canada aren’t ready to start just yet.

“I think very much depends on how fast we can move ahead with the discussions with the EU, about our future relationship with the EU because. That’s obviously a crucial element in whatever we work out with Canada,” she said 

“I wouldn’t want to put a date on it.”

That’s a good call, say Kingston and others, because rushing to negotiate with Britain now — including adopting a new, bilateral version of CETA — would be a tactical mistake.

“It’s difficult to negotiate a trade deal with the U.K. when we don’t know what the relationship with Europe will be,” he said. “That is their most attractive feature — that they’re part of this massive common market.”

Britain and the EU now have 11 months to negotiate their own new deal that would include trade, fisheries, education, transportation and other areas, to avoid a so-called “hard Brexit.” Many economists, notably the Canadian-born head of the Bank of England, Mark Carney, have predicted dire economic consequences for Britain if a hard Brexit occurs.

If that comes to pass, Britain has said it would offer tariff-free access to trading partners starting for one year in 2021 to insulate the British economy from the no-deal shock.

“That changes the negotiating dynamics for Canada. If we’re getting this tariff-free access for a year, do we really want to negotiate for it?” said Mark Agnew, director of international policy for the Canadian Chamber of Commerce.

Jason Langrish, the executive director the Canada Europe Roundtable for Business, said that gives Canada a distinct negotiating advantage because Britain will need a deal more.

“If this doesn’t work out well for the U.K. and they crash out and have no deal effectively with the EU, and they don’t have any deals in place with anybody else, how strong of a negotiating position are they going to be in? Canada is going to have an advantage.”

Le Jeune d’Allegeershecque said the current Boris Johnson government hasn’t formally carried over that position, which was put forth by former prime minister Theresa May.

“There would be more tariffs than there are now, quite clearly, but whacking on massive great tariffs is not in line with what the government’s vision of who we are and where we want to be,” she said. 

Prime Minister Justin Trudeau said Friday he was confident that Britain’s departure from the EU would be marked by “an orderly transition” with minimal disruption to Canadian trade and investment.

“The greatest threat was on a so-called no-deal Brexit. They’ve avoided that,” Trudeau told reporters Friday in Montreal.

“We are very confident that we will minimize any disruptions to investment, to trade, to people-to-people ties with the United Kingdom.”

In addition to negotiating with the EU and Canada, Britain is also planning to negotiate a series of bilateral deals with the United States, Australia, Japan and New Zealand before the end of the year.

“We have actually been engaged with the United Kingdom over the past few years working on that transition plan,” Trudeau said.

Kingston said there is one potential dark side for Canada if there’s a hard Brexit: some Canadian companies based in London that are using the financial hub as an entry point into Europe could be negatively affected.

But many firms, particularly in the highly mobile financial services sector, are opening “satellite” offices in Ireland and Germany, to maintain their European access, he said.

Le Jeune d’Allegeershecque said those offices “are more of a hedging their bets option rather than a desire to move elsewhere.”

This report by The Canadian Press was first published Jan. 31, 2020.

Mike Blanchfield, The Canadian Press