Since we are on the verge of a Canadian style FTA or more correctly a Comprehensive Economic and Trade Agreement (CETA) I thought it would be useful to have a look in a bit more detail and found that the House of Commons library published a research briefing (HERE) on it in July this year which makes interesting reading. Work began to negotiate a free trade deal with Canada in May 2009 and it took until 2014 to settle the details plus another two years before it was signed in October 2016. The briefing paper says, "CETA has been in force provisionally since September 2017. Most, but not all, of the agreement is in force".
So, we are looking at an eight year time frame although some of this is due to getting 28 countries to agree to it so on our own it's likely to be a little bit quicker. But CETA is not without its problems.
So, we are looking at an eight year time frame although some of this is due to getting 28 countries to agree to it so on our own it's likely to be a little bit quicker. But CETA is not without its problems.
It might be helpful to put a link to CETA (HERE) in full and also to a summary of it in something called the Joint Interpretative Instrument (HERE), a legally binding part of the agreement. CETA runs to 1598 pages and is not an easy documents to read by the way. I don't claim to have done so in any detail, but I am interested in the problems the UK might encounter in getting a FTA like CETA. There are several issues with what the UK is attempting.
On regulatory alignment we have declared several times that we intend to diverge, yet almost everything in CETA talks of regulatory cooperation (see Chapter 21 starting on page 173) with presumably a view to bringing regulations into closer alignment. It wouldn't make sense to cooperate in bringing different regulations to achieve the same thing. The Joint Instrument talks of creating a platform to allow "better quality of regulation and more efficient use of administrative resources".
While full harmonisation is not part of the deal it is clear that this is the aim.
On lowering of standards, the Joint Instrument says, "CETA will also not lower our respective standards and regulations related to food safety, product safety, consumer protection, health, environment or labour protection. Imported goods, service suppliers and investors must continue to respect domestic requirements, including rules and regulations. The European Union and its Member States and Canada reaffirm the commitments with respect to precaution that they have undertaken in international agreements".
This would put a pawl onto the regulatory ratchet and prevent us lowering standards in all the areas listed (and the EU are famous for giving the widest possible interpretation of the definitions) so it will severely limit those who want to cut standards. We would effectively be locked into the EU regulations that we have been party to for the last forty years. Goods imported into the EU will need to respect EU regulations and if the EU is the biggest market, exporters in the UK will probably opt to keep EU regulations as their standard anyway.
And the precautionary principle that John Longworth was so exercised about (HERE) is absolutely enshrined in the agreement - and rightly so.
The Canadian economy is about the size of Russia's, so not insignificant. But you can see by how much (or rather how little) UK GDP is boosted through CETA by the figures given in the briefing paper which says:
"The government's central estimate of CETA's net impact on UK GDP is £730 million per annum. In addition, we expect UK business to gain around £70 million from engaging in more public contracts in Canada under the central scenario. Not all of these gains are expected to accrue in the first year that CETA is implemented".
This is chickenfeed but is how the gravity model works. You do most business with countries closest to you. Free trade deals are touted as one of the main reasons for Brexit but our economy is already down by £40 billion per annum (2% of our £2 trillion economy) according to the governor of the Bank of England (HERE). We would need an awful lot of trade deals to make up for what we have lost already, and we haven't even left yet and we will probably have to wait a long time for the very modest impact to be felt. Meanwhile we are putting our £600 billion a year trade with the EU at risk immediately.
Joining the TPP (Trans-Pacific Partnership) is being talked about this morning (HERE) but will run into exactly the same problem.
In a speech at the European Parliament in December 2015, Cecilia Malmström, the EU Trade Commissioner talked about CETA and the EU's ambition as far as trade and the world is concerned:
"CETA is a significant step forward in our efforts to shape the future of the global economy, inspired by European values. It's therefore consistent with the approach we have adopted in our new strategy in October 2015"
Looked at from this perspective, Brexit is even more irrational. The EU is the leading global standard setter. In or out we'll be affected, being well inside the huge regulatory gravitational field of Brussels. But as a non-member, we will be a rule taker - whatever happens - rather than helping to shape the global standards from the inside.
And rather oddly, CETA has a section on geographical indications (GIs) and I know this has been a bone of contention in the Brexit negotiations with the EU. Canada has accepted them but note this in the research briefing:
"According to the Commission, CETA will protect “geographical indications” ie European foods which are associated with a specific area or region. The Commission website says: CETA recognises the special status and offers protection on the Canadian market to numerous European agricultural products from a specific geographical origin. The use of geographical indications (GIs) such as Grana Padano, Roquefort, Elia Kalamatas Olives or Aceto balsamico di Modena will be reserved in Canada to products imported from European regions where they traditionally come from.
Annex 20-A of CETA contains a list of these products. There are no UK products on the list".
Annex 20-A starts at page 516. So, we had the chance to protect UK producers in the CETA FTA but didn't take it. Our government seems to have no interest at all in protecting our manufacturers from copycats in Canada or anywhere else. The Europeans are far better at this.
And there are legal and constitutional issues too. The Briefing paper says, "In September 2016, the House of Commons European Scrutiny Committee recommended that there be an early debate on CETA on the Floor of the House for the following three reasons:
• It raises complex legal and policy issues for the UK, both while it is a Member of the EU and after its withdrawal from the EU, which the Government has as yet failed to adequately address (including on issues of competence, provisional application and the implications of Brexit);
• The trade deal continues to generate significant public interest (for example, various stakeholders across the EU have raised strong opposition to its investment provisions); there is a general need for more transparency in trade negotiations and their conclusion to ensure their democratic legitimacy; and
• Although there is parliamentary control over ratification of treaties, such a debate would provide the only opportunity for the House of Commons as a whole to scrutinise and have a say on the Government’s position on CETA before it is signed and then implemented".
Parliament cannot amend the CETA agreement: it can only accept it or object to it so government ministers have immense power in these matters. Ratification is simply a matter of laying the FTA before parliament. If nobody objects, it is ratified automatically. There is little proper scrutiny of the details.
