Worldwide: Implications Of The Brexit Vote For The CETA

According to Canada's International Trade Minister, Chrystia Freeland, her European counterparts are highly motivated amidst the fall out of the United Kingdom's (UK) vote to leave the European Union (EU) to demonstrate that the EU is a significant player on the international stage, with or without the UK. The signing and ratification of the Comprehensive Economic and Trade Agreement (CETA) represents an opportunity to prove it. In a recent interview with The Globe and Mail, she is quoted as stating: "If anything, the political momentum for the CETA is even stronger than it was before because the EU is very determined to show it's able to move forward." In short, Minister Freeland is offering assurances to Canadians that with the CETA having taken on important political significance in the face of the Brexit vote, it will be signed in the fall and ratified next year, as planned.

Easier said than done? No doubt.

While the ultimate goal of a Canada-EU trade agreement coming to fruition will likely still occur, realistically, complications caused by the Brexit vote may significantly delay the process of its implementation.

The Brexit referendum question is answered. But, it has created a host of others. Uncertainty abounds.

What is the CETA to Canada without the UK? And where exactly will the UK, the European Union's number two economy and Canada's largest trading partner, ultimately be landing in all of this? It appears many in Britain are currently hoping for utopia: that Britain can leave the EU but stay in the single market with all the benefits that flow from that. With a "#BRENTRY" hashtag campaign on Twitter in full force and a massive email petition to British Members of Parliament, this seems a popular collective wish. Whether such a result is realistic is a live issue, with more questions than answers on the way forward for CETA and Canada's international trading relationships with the EU and the UK.

Potential Complications for the CETA

Given the current flux and myriad interests and dynamics, we foresee that CETA complications could arise in three areas.

1. A CETA Without the UK is not the Same CETA for Canada

With the Brexit vote, Canada is posed with a situation where a critically important component of the EU economy, namely the UK, will no longer be covered by CETA. Canada negotiated and agreed to the terms of CETA on the premise that the agreement included the UK. With the Brexit, Canada has been placed in a position where it must consider whether the "balance of concessions" from the negotiations has changed enough to make it necessary to modify the agreement.

At their core, trade agreements reflect the balance of the give-and-take between the negotiating countries. In the context of CETA, Canada agreed to open access to its market in return for improved access to the larger EU market. For example, Canada eliminated or reduced tariffs on most products, granted increased access for dairy products, and agreed to apply rules to provincial procurements. If the UK does in fact leave the EU following the Brexit vote, the number one destination for Canadian exports to the EU is no longer covered by CETA. This is an incredibly significant loss: the UK accounts for approximately 18% of the total EU market.

The question thus arises: Is Canada now getting enough for what it gave up?

The answer is not an easy one. On the one hand, Canada was very successful in its negotiations and the give-and-take that was crystallized when the UK was still a going concern within the EU context might still be acceptable. However, a number of questions around some of the hotbed issues in the CETA negotiations need to be revisited and evaluated to reconsider whether the terms are still fair for Canada. For example, under the CETA as negotiated (envisioning the UK as a member of the EU), Canada agreed to open for the EU a new bilateral quota of 17,700 tonnes of cheese (16,000 tonnes of which are for high quality cheeses and 1,700 tonnes for industrial cheese). Moreover, 800 tonnes of high quality cheese are to be added through a technical adjustment to the EU portion of an existing World Trade Organization Tariff Rate Quota (TRQ). The effective total is thus set to be 18,500 tonnes. This will more than double the EU's export of cheese to Canada. This will represent an increase of EU cheese exports into Canada of 128% and corresponds to more than 4% of the Canadian market.

In contemplation of the UK's exit from the EU, should Canada agree to continue to allocate the full 18,500 metric tonnes to the EU and then negotiate a further TRQ for the UK? Or, should it reduce this amount to leave some open for the UK (for example, Stilton blue cheese) so that the total volume for CETA and the UK stays the same at the contemplated 18,500 metric tonnes? Other examples of whether modifications to EU access set out in CETA include: origin quotas (more liberal rules of origin that apply to certain volumes of certain products), processed foods, dog and cat food, fish and seafood, and textiles and apparel.

There are also EU quotas that apply to Canadian outbound trade, including those to processed shrimp, frozen cod, wheat, sweetcorn, beef and veal, and pork. For these quotas the same concerns arise albeit in respect of accessing the UK and EU markets. How will they be divided between the UK and EU? If Canada agrees to the current CETA text, will it have to negotiate new access with the UK? Would the EU agree to opening its market to the same extent given that the UK is no longer there?

Delays in implementation may be inevitable if a rebalancing exercise of the give-and-take of the CETA is carried out. There has been no official announcement of Canada's intention to date, although an unnamed government official of International Trade recently quoted in The Globe and Mail stated that Canada does not wish to renegotiate the CETA due to concerns it could place the entire treaty at risk. Whether the CETA will be re-opened or not remains live, with pros and cons in both approaches.

2. The Loss of the UK as a CETA Advocate

The UK has been a longstanding proponent of the CETA. With the UK now ultimately posed to exit the EU and bow out of CETA, it may prove more difficult to obtain ratification of the agreement by the individual EU member states. On a positive note, the UK has undertaken to vote in favour of CETA as it will in all likelihood still be part of the EU when the vote occurs as negotiations for withdrawal will take time.

3. CETA One of Many Complex Issues Now Requiring Attention from EU and UK

The vote by the UK to leave the US has resulted in the relationships between the EU, UK, Scotland and Ireland coming under discussion. England voted for Brexit, voting "Leave" by 53.4%, as did Wales, voting "Leave" by 52.5%. However, Scotland and Northern Ireland both backed staying in the EU. Scotland backed "Remain" by 62%, while 55.8% in Northern Ireland voted "Remain".

These divergences mean that: (i) there is uncertainty as to the coverage and nature of the EU and therefore the coverage of the CETA; and (ii) the EU and the UK have many complex issues to address as quickly as possible. It is unclear at this point whether the CETA will be given a high enough priority to get the necessary attention to move it forward as scheduled. It is likely that the length of delay in moving forward with the CETA will depend on where it stands on the list of EU and UK priorities. The UK now finds itself in the position of having to negotiate new trade agreements with all of the countries with which the EU currently has free trade agreements. The CETA will be one of many in the mix. Realistically, trade agreement negotiations will likely overwhelm the UK in the short term.

4. Ratifying and Implementing the Agreement Now and Sorting it out Later

One option is for Canada and the EU to ratify and implement the agreement now and sort out the UK's exit from the EU at a future date. In theory, the UK could inherit the pre-separation EU treaties including the CETA. However, at least in the case of the CETA, certain rights and obligations, such as the quotas referred to above, would have to be apportioned between the EU and the UK. Such an exercise would involve three-way negotiations between the EU, UK and Canada and could be very complicated and difficult given how such apportionment could impact the original balance of the give-and-take reflected in the CETA.

What can we Expect any Modifications to Look Like?

There is no question that it is in both Canada and the EU's interests to finalize and implement CETA. From Canada's perspective, the EU is a key market. The CETA is a landmark agreement that is viewed by many as representing a gold standard for trade agreements to come. Aside from the trade benefits, a trade agreement with Canada post-Brexit would serve to send a much needed positive signal to currently testy global markets.

Still, the question remains: does it now need to be modified? It is not possible to speculate on the changes. The situation is fluid as it has not yet been determined now what will happen between the UK and the EU and between Ireland and Scotland and the EU as relationships are considered and redefined.

Possibilities include the following:

  • A CETA minus the UK or Britain, with or without a rebalancing of concessions to reflect this;
  • A trilateral agreement between Canada, the EU and the UK which could look very similar to the current CETA; or
  • Two separate agreements between Canada and the EU and Canada and the UK which might not look like the current CETA (Note that the benefits access to the UK market bring might be diminished by the change in access between the UK and EU).

While there are currently many uncertainties, what is certain is this: there has been a tectonic shift in the trade landscape that will require time for Canadian trade officials to consider and determine the best way forward.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions