Brexit Institute News

Attack of the Clones: Three Clarifications Regarding the UK-Canada Trade Agreement

Joris Larik (Leiden University)

Against initial doubts about the UK’s capacities in the area of trade negotiations and with only a few weeks of transition period left, on 21 November, the UK government reported that it had secured a “vital rollover trade deal with Canada.” The agreement will make sure that the UK and Canada could continue to trade on terms equivalent to those that currently apply to Canada and the EU (including the UK due to the transition period). In essence, it “clones” the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU.

The very fact that such a rollover agreement is needed reminds us of the global reverberations of Brexit, which has put the applicability to the UK of hundreds of international agreements concluded by the EU with external partners to UK into question. For this reason, over the past two years, the UK has engaged in a worldwide “continuity programme” producing dozens of “cloned” EU trade agreements.

Following some early successes with smaller partners such as the Faroe Islands and Papua New Guinea, the UK has now also managed to secure continuity trade agreements with economically more important countries. These include Switzerland, Ukraine, Japan and now Canada—though it is worth recalling that the EU will remain the UK’s largest trading partner for the foreseeable future.

Regarding the announcement of a Canada-UK agreement, it is worth making three clarifications:

First, the UK-Canada agreement is not replacing an EU agreement that is currently in force. CETA is a so-called “mixed agreement” which requires ratification by the EU as well as all of its Member States. At the time of writing, fourteen Member States and the UK (while it was still an EU member) had ratified it, which leaves thirteen where this is yet to happen. In some Member States, such as the Netherlands and Cyprus, it is all but certain there will be the requisite majorities for this to happen. Meanwhile, from September 2017, most of CETA has been provisionally applied, except for the parts on investment protection and the investment court system (ICS), which lie outside of the EU’s exclusive powers and are politically highly contested.

On the one hand, this practice of a continuity agreement replacing a mixed agreement confirms that the UK considers itself to “fall out of” agreements to which it is an original party and which it has ratified. On the other, if the UK-Canada agreement were ratified by both parties while the EU would have to discontinue provisional application of CETA due to insurmountable ratification hurdles in some Member States, the UK and Canada could end up with a much favourable trading relationship than the EU and Canada. CETA’s clone would survive, while the original would have perished.

Second, before contemplating the scenario sketched in the previous point, it must be noted that there is no actual treaty between the UK and Canada at this point either. What was reached on 21 November was an “agreement in principle”. According to the UK government, the “UK-Canada Trade Continuity Agreement will be subject to final legal checks before it is formally signed” and should “come into effect on 1 January 2021.” Therefore, important specifics such as the exact terms and coverage of the UK-Canada agreement as well as its provisions on duration (indefinite until terminated/superseded or with an expiry date?) will only become clear once the text is signed and published. This may soon be the case because a) the transition period is running out fast and b) in the case of the UK-Japan continuity agreement, the signed agreement was published a mere six weeks after the announcement of the “agreement in principle.”

Third, what is remarkable about the announcement of the UK-Canada continuity agreement is that it is to be followed by a “bespoke UK-Canada” agreement which is to be negotiated in 2021. This would suggest that the “CETA-clone” agreement is to apply only until a new agreement is concluded. By contrast, in the case of the UK-Japan agreement, the UK government announced that the clone of the EU-Japan Economic Partnership Agreement (EPA) was already “securing bespoke benefits for British businesses and citizens” going beyond its template in areas such as digital trade and financial services.

In many ways the future UK-Canada “bespoke deal” will be the real proof of the pudding for the UK’s post-Brexit performance on the international stage. The UK is only about one sixth of the size of the EU economy (pre-Brexit) in terms of GDP. While still being a sizeable market in its own right, there is a hypothesis to be made that the UK would not receive equally—let alone more—favourable terms as the larger EU in trade negotiations. While the continuity agreement benefits from the incentive of avoiding an abrupt deterioration of trading terms for the time being, the “bespoke agreement” will be highly relevant for ascertaining what the UK can achieve outside of the EU in the mid- to long-term. In particular, will the Canadians want to take back certain concessions, which they had granted to the EU in oftentimes tough CETA negotiations, with regard to the UK?

According to the UK’s Secretary of State for International Trade Liz Truss, “joining forces with Canada will allow Britain to change the world.” While this may be somewhat of an overstatement, the UK-Canada continuity agreement is certainly a welcome success for British post-Brexit trade diplomacy so close to the end of the transition period. More importantly, however, it sets the stage for a future “bespoke agreement,” a close compare-and-contrast of which with CETA will be revealing about the benefits and constraints of being inside or outside the EU. In other words, the “clone wars” of trade agreement have only begun.

Joris Larik is Assistant Professor of Comparative, EU and International Law at Leiden University

Image credit: Prime Minister Boris Johnson met Canadian Prime Minister Justin Trudeau (August 2019), Flickr No 10 via a CC BY-NC-ND 2.0 licence

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