Canada-U.K. Trade Relations And What To Expect Post Brexit
On June 23, 2016, voters in the United Kingdom surprisingly changed the course of that nation’s future when 52% of ballots were cast in favour of leaving the European Union, with the departure colloquially known as Brexit. The country first joined the European Economic Community (EEC), a predecessor of the European Union (EU), in 1973, and confirmed its membership in a 1975 referendum garnering 67% of votes from the public.
Former British Prime Minister David Cameron staked his political future on the belief his country would ultimately opt to remain part of the 28-country EU membership following the referendum vote. He was wrong – and thus relinquished his leadership. His replacement, current British Prime Minister Theresa May, opted not to hold hasty discussions with the EU at any point last year, preferring instead to properly ascertain the best strategic moves.
“I want to work with the European Council in a constructive spirit to make this a sensible and orderly departure,” May said at a media conference last summer.
The U.K. government intends to invoke Article 50 of the Treaty on European Union – the formal procedure for withdrawing – by the end of March. Heated debates in the British Parliament are currently underway as of publication.
The impact on trade relations between the United Kingdom and the European Union won’t be known for at least another two years, which is the expected timeline that will be required for Britain to totally extricate itself. Here in Canada, the widespread assumption is that our country’s trading with the U.K. will largely remain the same.
Liam Fox is the United Kingdom’s Secretary of State for International Trade. A medical general practitioner by profession, he was first elected to the British Parliament in 1992 and had previously written many speeches for Britain’s late Prime Minister Margaret Thatcher. He also was part of David Cameron’s government, serving in various senior ministerial roles. He was in Toronto recently to address a large business audience at the Toronto Region Board of Trade about what to expect from his country as it navigates its way through a very complicated Brexit process.
“I am currently heading up a department that has been called the greatest start-up in the history of British government,” he begins. “Six months ago, the Department existed only on paper yet now, we boast thousands of staff across the globe, and growing.”
Until last year, the world’s fifth largest economy had no department dedicated to international trade and commerce exclusively. But the June referendum on the U.K.’s membership of the EU delivered a golden opportunity for the United Kingdom to carve out its place in the world. And, for the first time in more than four decades, Great Britain will have an independent trade policy.
“Britain’s ambition is to become a global champion of free trade, working to remove barriers and liberalize commerce across the world,” says Fox.
There are still a number of people who question whether Great Britain will actually follow through and leave the European Union. Fox made it abundantly clear that the U.K. will in fact be leaving the EU, confirming there will be no second referendum. “It’s going to happen,” he confirms. “The British public were not asked to take part in a consultation. They were asked to give the government instruction – to remain in the European Union or leave, and the answer was clear.”
“A lot of people voted to leave the European Union for different reasons and I was one of the leaders of the ‘leave’ campaign,” reveals Fox.
Fox says the decision to leave the EU was largely about the U.K.’s ability to make its own laws, to determine its own borders and how to spend its own money. He believes it’s a very simple principle in democracy that those who make the laws must be accountable to those who live under the laws and the European Court of Justice wasn’t accountable to the people of Britain and therefore he found it democratically unacceptable.
Free trade should not just be about what’s good for the producers, but also what’s good for the consumers. Fox doesn’t believe the latter has been properly addressed.
“Consumers should be free to buy goods and services from whoever they want, at the lowest prices they can find. We’ve got to get the economy more responsive to what consumers want and less protectionist about the producers.”
Prime Minister May has made a clear statement on her country’s relationship with EU: enabling the U.K. to strike comprehensive trade agreements with other countries, and allowing the U.K. to remove unnecessary barriers where they restrict an ability to continue trading.
“Part of the process, while we remain a member, will be a continuing commitment to promote free trade from within the European Union. This means unwavering support for the EU-Canada Comprehensive Economic and Trade Agreement,” says Fox.
According to Fox, the signing of CETA at the end of last year was a great moment for global free trade, coming as it does at a time when a chorus of protectionism is rising across the world. He says it was a particular moment of pride for the United Kingdom.
“I congratulate my colleague, Chrystia Freeland, and her predecessors, for getting the deal done, and I look forward to working with (Canadian International Trade Minister) Francois-Philippe Champagne,” says Fox.
It is expected that CETA could be worth about $4 billion annually to the U.K. and as much as $12 billion to Canada. Fox says his country has every intention of continuing to honour its clauses as the United Kingdom opens a new chapter in its history.
“Ensuring that there is no disruption of our free trade with Canada, or any other partner, is a top priority for my Department,” confirms Fox.
Additionally, the British government plans to seek to replicate the EU trading schedules as the country takes its independent seat in the World Trade Organization (WTO), maintaining current tariff levels with a view to seeking further liberalization over time.
“We will seek an ambitious free trade agreement with the European Union, maintaining the greatest possible access to the single market,” adds Fox.
But in order to champion free and open trade, the United Kingdom believes it must re-forge its relationships with those nations who have been the longest serving and closest allies. The U.K. and Canada enjoy a friendship built not only on a long, storied history, but upon economic partnership and, above all, shared values.
“We share a unique degree of cooperation in almost every area of international relations,” remarks Fox. “We are members of, the G7, the G20, the Commonwealth, the Five Eyes intelligence network and NATO. We are both champions of free trade who understand that it is the best means to reduce global poverty and increase global prosperity.”
A shared bond between Canada and the U.K. has never been jeopardized and many would say the relationship is as strong as it’s ever been, cemented by a robust foundation of a fruitful commercial and economic partnership. The United Kingdom is Canada’s third-largest export market and its second-largest destination for foreign direct investment (FDI) after the U.S.
Canadians buy about $9 billion worth of British goods and services annually. Nearly 600 U.K. firms operate in this country, in industries from oil extraction to aerospace to pharmaceuticals. Many of them are based in major cities such as Toronto, Vancouver, Calgary and Montreal in a variety of business sectors ranging from financial services to food and beverage.
“Of course, I cannot come here as a representative of your second-largest investment partner, without making reference to your first, the United States. The U.K. is as committed to free and open trade with the U.S. as we are with Canada,” states Fox.
The three-way trading and investment alliance between Canada, the U.K. and the U.S. is vitally important not only to prosperity for the triumvirate, but to the stability of the free trading world.
“Our government has been greatly encouraged by the attitude of the new administration towards U.K.-American free trade, and Britain will continue to be a champion and advocate for free trade, working to remove barriers wherever they are found,” notes Fox.
When Prime Minister May took office in London in July, she did so with the promise to make the U.K. a global leader in free trade once more. For more than a century, Great Britain was the largest trading power in the world. In fact, few would argue that Britain and free trade were virtually synonymous.
“At a time when protectionism once again threatens our economic freedoms, and growth in world trade is slowing to a crawl, Britain will stand in defence of free trade, working with partners and allies, like Canada, to remove barriers and tariffs wherever they are found,” declares Fox.
Great Britain remains a global hub of exceptional businesses and investment opportunities, and since the referendum last year, the U.K. has attracted in excess of $25 billion of foreign direct investment, which is a clear sign that other nations believe the country remains a stable trading partner.
Fox says that in a globalized world, the United Kingdom must stand ready to trade with every partner, to build a free and open network of commerce and trust that will not only safeguard his nation’s prosperity, but spread wealth across the world.
“Two hundred years ago, Napoleon – a French leader – called Britain a ‘nation of shopkeepers’”, chuckles Fox. “Since then, we have worn his insult as a badge of honour.”
Trade has always been the lifeblood of the United Kingdom, and it will remain so.
“With Canada by our side at this historic time, there is no ambition we cannot fulfill, and no challenge we cannot rise to meet,” concludes Fox.