The agreement, which has been almost ten years in the making, has suffered from a host of setbacks, controversies and obstructions along the way. As one of the most ambitious and sophisticated free trade deals ever negotiated, the agreement’s provisional implementation represents something of a milestone moment for the cause of free trade, especially in light of the prevailing political climate, in which large-scale trade deals like CETA are increasingly viewed with suspicion and unease.
90 per cent of the agreement has now entered into force, including its provisions for reducing and eliminating tariff barriers, increasing mobility for business personnel, opening up government procurement markets and recognising the professional qualifications of certain professions. However, because CETA has been classified as a mixed agreement by the European Commission, some of its provisions will need to be ratified by the EU’s national and regional parliaments before they can enter into force. This includes the proposed investor court system (a mechanism for settling disputes between investors and state parties), which was the subject of significant controversy during the negotiation phase of the agreement.
CETA’s implementation sets new standards for trade in goods and services and will be a boon to UK businesses and consumers. In 2015, the UK exported over GBP 7 billion worth of goods and services to Canada, and imported nearly GBP 8 billion of the same. Under the agreement, customs duties in both directions have been eliminated on 98 per cent of all tariff lines (rising eventually to 99 per cent over a seven-year period). This tariff elimination will provide enhanced export opportunities for UK businesses, as well as cheaper goods for consumers.
What’s more, the agreement simplifies customs procedures to make the movement of goods cheaper, faster and more efficient, and it does away with the costly double testing of goods thanks to its provisions for the mutual recognition of conformity assessments in a number of sectors, including machinery and electronic equipment.
Away from trade in goods, CETA will make it easier for British firms to invest in Canada by increasing the threshold at which reviews of acquisitions of Canadian companies by non-Canadians are triggered, from CAD 354 million (GBP 212 million) to CAD 1.5 billion (GBP 900 million). It also opens up access for UK businesses to Canadian government procurement markets at national, regional and local levels.
In addition to all this, the agreement contains strong social provisions as well. CETA sets robust standards for labour rights and environmental protection, making it one of the most progressive FTAs ever negotiated. The agreement also makes it easier for skilled business people to move temporarily between the UK and Canada for work, and it establishes a streamlined process for the mutual recognition of professional qualifications, thereby helping to overcome a significant non-tariff barrier to services trade. Elsewhere on trade in services, both sides have granted each other greater market access in various areas, but even CETA falls some way short of the kind of services liberalisation that businesses would like to see included in the next generation of cutting-edge free trade deals.
In a separate development, UK prime minister Theresa May travelled across the Atlantic last week to talk trade with her Canadian counterpart, Justin Trudeau. In their discussions, the two leaders appeared to be in co-operative mood, with Mr Trudeau saying that he hoped the UK and Canada would make a “seamless transition” in their post-Brexit trading relationship. This would be achieved by “swiftly” transitioning the existing CETA into a “new bilateral arrangement between the UK and Canada after Brexit”. Mr Trudeau told journalists that the text of CETA – an agreement for which the UK was a particularly vocal cheerleader within the EU – would provide a “strong basis” for a “smooth transition…for investors, for companies and for workers and consumers” in both the UK and Canada.
Mr Trudeau’s apparent enthusiasm for rolling over CETA after the UK leaves the EU is certainly welcome news for the UK government and British businesses alike because, as outlined above, CETA is clearly hugely beneficial to the British economy and losing its myriad advantages so soon after they have been implemented would be a source of major disappointment. That is why it was so encouraging to see both leaders talking in such positive, co-operative tones about the need for a seamless transition. This will provide a greater level of certainty to businesses that the benefits of CETA that they currently enjoy thanks to the UK’s membership of the EU are not about to be withdrawn as a result of Brexit.
Of course, more needs to be done and the business community will look forward to hearing more detailed proposals in the near future about just how such a transition will be managed. (A new bilateral trade working group has been established – the thirteenth such group the UK has set up since the referendum – to lay the groundwork for a new deal.) It should also be noted that, outside of the EU, the UK’s priorities on trade will likely differ from those to which it signed up as an EU member. CETA was designed and negotiated with the whole of the EU in mind. As such, its wholesale transition would not necessarily be appropriate in all the specifics for a post-Brexit United Kingdom. It was therefore encouraging to hear Mr Trudeau talk about “opportunities for us to look at particular details that could be improved upon” for the UK and Canada’s specific needs. In particular, a greater degree of services sector liberalisation would be welcome for a British economy that is almost 80 per cent services based. It is in exactly these kinds of areas that the potential upsides to Brexit for UK trade may be realised.