What would a 'Canada-style' UK/EU trade deal look like?

As the UK seeks a post-Brexit trade arrangement with the EU, prime minister Boris Johnson has suggested a "Canada-style" deal with the bloc. But what exactly does that mean?

The EU's agreement with Canada is called the Comprehensive Economic and Trade Agreement (Ceta). Comprehensive is the right word: it extends to 30 chapters and more than 1,000 ages of annexes. Negotiations began in May 2009 and concluded in August 2014; the agreement provisionally came into force in September 2017, although as yet not all the 27 member states have individually ratified it.  

Ceta is not quite zero-tariff but it removes around 98 percent of tariffs (import taxes) on traded goods: poultry, meat and eggs are the exceptions. However, it does not remove regulatory barriers (and the resultant border checks) because Canada is not a member of a single market.

Here, CGTN examines various potential aspects of a 'Canada-style' deal - and the alternative if no deal is reached. 

Travel

For those who do not run or own businesses, one of the main benefits of Ceta is that those journeying between Canada and the EU do not need a travel visa. 

This was not a simple process - at one point, the whole agreement was put in jeopardy when the Czech, Romanian and Bulgarian governments threatened to pull out unless their nationals were allowed to enter Canada without visas; the Canadian government lifted restrictions in 2017.   

Without a deal: Visitors travelling between the UK and EU would require a visa to travel.

Services

The services sector, and particularly the financial services sector, is vital to the UK economy - particularly the financial services sector. In December 2017, Brexit secretary David Davis argued for a "Canada plus plus plus" agreement to achieve "an overarching free trade deal, but including services, which Canada doesn't."

In fact, Ceta has a long section on services - the European Commission called it the most comprehensive trade agreement on services that it has ever concluded - which has caused some opposition, with protest groups claiming its use of a 'negative list' (in which everything not explicitly excluded is deemed to be included) might threaten public services. 

Despite the wordiness and rhetoric, in the grand scheme of things Ceta does little for trade in services, especially financial services. The EU convinced Canada to "liberalize" some of its sectors, allowing EU firms to tender bids for Canadian services; it remains to be seen whether this is the kind of free trade Johnson wants.

Without a deal: The EU and UK would have to operate under the World Trade Organization (WTO) rules, specifically the 1995 General Agreement on Trade in Services (GATS). As the word 'general' suggests, this is a very limited and narrow form of integration: for instance, the UK financial sector would lose 'passporting', by which firms can do business in the EU without chasing authorization from each member state.

Agriculture

One of Ceta's headline figures is that it removes 98 percent of tariffs on traded goods, and there has understandably been a big rise in trading since: in 2018 EU exports to Canada rose 11 percent on 2017, while imports from Canada were up 7 percent.

However, Canadian agricultural exports to the EU fell 15 percent as farmers struggled to adopt Ceta-enforced European standards prohibiting antibiotics and insisting on endorsement by EU-certified vets. 

Seeking to promote trade, Ceta raised quotas - the amount each side can export to the other without extra charges. It is perhaps indicative to note that while European fine cheese exporters happily filled their quota, Canadian pork farmers only reached 3.1 percent of theirs.    

On the other hand, Canadian meat farmers have continued to export to the US, which does not share the EU's stringent standards. Meanwhile, the UK's longstanding EU membership means it may not face the same alignment problems.

Without a deal: The WTO has an Agreement on Agriculture, but as a UK Parliament select committee noted in 2018, "Reverting to WTO tariffs will have a significant impact upon agriculture as tariffs are higher for agricultural products than for other goods and services. We note that the sheep, dairy and cereals sectors, those particularly dependent on the export market, will be most affected."

Jobs

One of the agreements in Ceta is that government contracts are opened up to anyone. For instance, if a contract to build a Canadian railway became available, then firms in EU countries would be able to bid for this - and vice versa.

Ceta also allows qualifications to be recognized both in Canada and the EU - making it easier for professionals, such as builders or accountants, who would not require any further qualifications to work in either country.

In certain circumstances, Ceta also exempts Canadian employers from the Labor Market Impact Assessment (LMIA) - a protectionist measure which forces employers through a rigorous domestic recruitment procedure, essentially to prove no Canadian could do the job instead. LMIA exemption is therefore a boon to EU workers seeking a transfer to Canada - but for the UK, which is considering restricting immigration, this may suggest that the EU has negotiated strongly.  

Without a deal: The WTO has an Agreement on Government Procurement, but it is plurilateral rather than multilateral (ie several, but not all, members have signed up). The UK would also have to negotiate separately regarding the recognition of qualifications, along with workforce immigration.

Originally published by CGTN Europe, 17 Feb 2020. Additional reporting by AJ Wood