Britain will table its plans for the Canada-style free trade agreement before the next round of negotiations. Michael Gove, the chancellor for the Duchy of Lancaster, who advises on policy development, said this week that the government put forward a series of draft legal texts as Britain attempts to take the initiative in talks. The plans are likely to highlight the distance between the two sides on issues. The most contentious which will be thrashed over in negotiating rounds alternating between London and Brussels are demands for a level playing –field on state subsidies, environmental protection and workers’ rights.
WHAT EXACTLY IS A CANADA-STYLE TRADE DEAL?
Canada’s free trade deal with the EU is known as the Comprehensive Economic and Trade Agreement (CETA) and took seven years to negotiate. It came into effect in 2017 and will be fully implemented within seven years, although it has not yet been signed off by all the EU member states. We've heard a lot about wanting a "zero-tariff, zero-quota" deal between the UK and the EU. Ceta does not do that.
According to the BBC, the deal eliminates 98% of all tariffs on goods traded between Canada and the EU. The agreement does not fully remove regulatory barriers, however, as Canada is not a member of the single market, it is still subject to border checks.
The broadcaster adds that the deal “encourages the use of advanced electronic checking to speed up customs clearance”. Under the deal, the EU could decide to place greater barriers on Canadian trade with European countries. But unlike the EU27, Canada is free to strike trade deals with other countries around the world. On the other hand, Canadian financial services do not have full access to the European market. In 2018, financial services contributed £132bn to the UK economy - 6.9% of total economic output.
CETA allows professional qualifications to be recognised in both Canada and the EU, making it easier for people to travel and work in both places. However, fact-checking site Full Fact notes that the movement of services is “much more limited than within the single market”.
The EU says it can’t give the UK a Canada-style deal without regulatory realignment. Its negotiating mandate cites EU labour, environmental and other standards merely as “reference point”. But it wants British commitments to be legally binding; and, for state subsidies to industry, it demands full adherence to its rules. Britain promises not to undercut the EU unfairly, but it rejects sticking to the bloc’s laws on the grounds that regulatory divergence is a key purpose of Brexit. On state aid the EU wants to go even further, saying a trade deal must ensure “the application of Union state aid rules to and in the United Kingdom”. That idea was dismissed out of hand by Number 10.
Although the EU has pulled back from French demands that Britain should be forced to adopt any new regulations in other areas such as labour and environmental standards — so-called “dynamic alignment” — the level playing field remains highly contentious.
Another sticking point in the trade deal is fish – although it accounts for 0.1 per cent of the British economy, control of fishing stocks is totemic for Brexiteer. The EU negotiating mandate wants to “uphold” continued reciprocal access with “stable quota shares” to be divided between UK and EU fisherman. The UK wants to agree on access to its waters on an annual basis. Fisheries must be settled by July 1 and failure to agree a deal could derail the rest of the trade talks.
EU Chief post-Brexit negotiator Michel Barnier has insisted that the EU was ready to offer a good deal to the UK after the post-Brexit transition phase expired at the end of the year. But he added that Britain’s geographical position meant it could not be treated in the same way as more distant countries.
Speaking at the London School of Economics last month, senior adviser to Barnier, De Rynck said: “If you allow some irony, some in the UK now seem to want to become Canadians. But of course, Dover is much closer to Calais than Ottawa is. The distance from Dover to Calais, and – thanks to the foresight of Margaret Thatcher and others – the speed of connection to the tunnel, is of course much quicker than what we have with our Canadian friends. So proximity matters.”
He said what mattered was the interconnectedness between economies. “Zero-quota, zero-tariff access, this brings a lot of benefits to the UK economy and with benefits come obligations,” De Rynck said. “And it’s clear that for us it’s a different ball game that we are playing with the UK to the one that we agreed with Canada in terms of the level playing field.”
Guy Verhofstadt, a senior MEP and former prime minister of Belgium, who has led the European parliament’s approach to Brexit, said the UK was approaching the negotiation as if the sides were “living on two different planets”.
He added that it would be a “hell of a job” to secure a successful outcome from the negotiation given the British approach.
The No.10 Downing Street Press Office responded to comments from Barnier with a tweet saying that in 2017 the EU had offered a Canada-type free trade agreement as “the only available relationship for the UK”, given Britain’s demands. “Now they say it’s not on offer after all… What’s changed?” it asked Michel Barnier.
IS SUCH A DEAL POSSIBLE IN LESS THAN A YEAR?
Despite the potential difficulty of negotiating in a tight timeframe and pre-negotiation tension, trade experts believe a deal can be done and that both the EU and UK negotiating mandates leave negotiators enough room for compromise – if the politicians are willing.
“There will be a lot of noise and shouting but I think there will be a trade deal this year,” Sam Lowe, a trade expert at the Centre for European Reform think-tank, was quoted saying in the Financial Times. “I just don’t think it will be a very good trade deal when you think of the disruption it will involve.” Lowe added: “Both sides are pretty aligned on what they want.”
David Henig, a former UK government trade official who helped to negotiate the EU/US TTIP trade deal, agrees: “You can see a landing zone here. Both sides are talking about the same kind of deal,” he told the Financial Times.
