Andrew Hammond is Associate with LSE IDEAS at the London School of Economics.
The European Union and Canada hold a summit in Brussels on Monday and Tuesday, with Prime Minister Justin Trudeau meeting with his EU counterparts after the NATO and G7 meetings. At the center of the discussion is the historic bilateral trade agreement, the Comprehensive Economic and Trade Agreement, or CETA, which has resulted in an increase in bilateral trade, including a 15% increase in EU exports to Canada. in 2020 only.
Although the bilateral relationship is largely positive, there are some irritants, including the EU’s ban on the import of seal products. Yet the relationship is fundamentally cooperative, built from a series of economic agreements since the 1970s and joint membership in bodies such as the Group of Seven and the Group of 20.
In 1976, the then European Economic Community and Canada signed an Economic Cooperation Framework Agreement, the first formal agreement of its kind between the European body and an industrialized third country. The office of the Delegation of the European Union to Canada has also opened in Ottawa.
In 1990, broadening the scope of their dialogue, European and Canadian leaders adopted the Declaration on Transatlantic Relations. More recently, in 1996, a new political declaration on EU-Canada relations was signed at a summit in Ottawa, adopting a joint action plan identifying other specific areas of cooperation.
Based on these agreements, CETA, which covers about a fifth of the global economy and took nearly a decade to negotiate, was signed in October 2016. Ninety-eight percent of all tariffs on goods traded between the two powers were eliminated and the deal was touted as “the most ambitious trade deal the EU has ever concluded”. Most tariffs were removed when the agreement entered into force provisionally in 2017.
CETA took on particular importance during the Brexit negotiations between Britain and the EU. Many Brexiteers saw the deal as the model for what became the EU-UK trade and cooperation agreement last December.
The EU has negotiated a wide range of trade agreements for member states, but for many Brexiteers this “Canadian model” has prevailed. Part of the reason for this is that it allowed Britain to leave the Brussels-based club entirely, including the customs union and the single market, and allow London to enter into bilateral trade deals with other countries, as well as multilateral agreements such as the Comprehensive and Progressive Agreement. for the Trans-Pacific Partnership.
However, as glorified as CETA is by some Brexiteers, the model has also come at costs for Britain given the varying starting positions of London (previously a member of the EU for more than four decades and embedded in many many structures) and Ottawa. While CETA represents a clear level of integration between the economies of the EU and Canada, the new EU-UK deal was a sharp break (or “hard Brexit”) between the entities.
In addition, CETA does little to activate some key business sectors, notably financial services. CETA also does not eliminate border controls, although it does encourage the use of advanced electronic control to expedite customs clearance.
Another potential challenge, the Canadian-style deal ended Britain’s preferential access to more than 50 markets outside of Europe with which the EU has trade deals. While many of these have now been renegotiated bilaterally, there was no guarantee that London would get terms as good as before.
While the Brexiteers also suggested that negotiating a Canadian-style deal would be relatively easy, it belies the challenges initially involved with CETA. Indeed, in 2016, after about seven years of negotiations, there was an almost complete breakdown in CETA talks. This happened when the legislature of Wallonia – a region of Belgium with a population of around 3.5 million – told Canada that its opposition to key provisions of the proposed deal was “red lines.” .
While those concerns have since been largely assuaged, then-Canadian International Trade Minister Chrystia Freeland said at the time that a deal was now “impossible.” Then-EU Trade Commissioner Cecilia Malmstrom also said that “if we can’t do [a deal] with Canada I’m not sure we can do [one] with the United Kingdom.
Taken in hand, CETA is at the heart of the renewed partnership between Canada and Europe. While this same deal has become a key point of debate in the Brexit dialogue, the balance of pros and cons of a Canadian-style deal with Brussels is different for London than for Ottawa given the deep integration of the economies. British and European in the post-war era.
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