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CBC | 9 December 2020
Canada-UK trade deal signed — but implementing bill unlikely to meet deadline
by Janyce McGregor
International Trade Minister Mary Ng introduced legislation today to implement Canada’s newly signed transitional trade agreement with the United Kingdom — but it’s not likely to become law before the government’s Dec. 31 deadline.
A release from the British High Commission said the U.K.’s Deputy High Commissioner for Canada David Reed and John Hannaford, Canada’s deputy minister of International Trade, signed the treaty in Ottawa this morning. There was no public ceremony or media access at the event.
"More than ever now, I think it’s really important to ensure that our Canadian businesses get the continuity and the predictability that they need. That’s what this agreement will do," Ng said after tabling the bill.
Ng also tabled the legal text of the Canada–U.K. Trade Continuity Agreement (TCA) to coincide with the bill’s introduction. The two countries announced they’d reached a deal on Nov. 21, but the details of what the deal actually included weren’t released at the time.
On Jan. 1, the current rules governing trade between Canada and the U.K. will expire as Brexit takes hold and the British government assumes full responsibility for its trade policy independent from the European Union.
The trade minister has promised to work with her U.K. counterpart to mitigate any short-term effects of not having the new measures fully ratified.
"What Canadian businesses don’t have to do is prepare for a what-if plan, a contingency plan," Ng said. "I want to assure Canadian businesses that we are going to work very hard to make sure that there is a smooth transition for them and that they don’t experience disruptions as they export into the United Kingdom."
Until now, trade with the U.K. has been liberalized by the terms of the Comprehensive Economic and Trade Agreement (CETA). While not yet fully ratified by all of the EU’s member states, the bulk of CETA’s measures took effect in 2017.
Had no deal been reached to cover future two-way trade with Canada, new tariffs and other restrictions could have hit Canadian and British businesses this winter.
Instead, the new deal temporarily "rolls over," or replicates, most of CETA’s terms for the immediate future, allowing both countries more time to consider the arrangements they want to have in place permanently.
Replicates CETA, more or less
The investor-state dispute resolution chapter of the CETA was one of the few parts of the agreement not brought into force provisionally in 2017. Instead, implementation is on hold until all EU countries finish their ratification processes, which are still underway.
This new U.K.-only deal replicates the language in the CETA — but if a panel were to be formed to arbitrate a dispute, the panelists would only be from Canada and the U.K., not other EU countries.
Nothing in this Canada-U.K. deal affects the CETA as it applies to other EU countries. But in some instances, limited Canadian market access volumes that were previously shared across 28 countries are now split across only 27, like the tariff rate quota (TRQ) for sensitive farm products.
The new agreement includes a side letter specifically on cheese. Under CETA, British cheesemakers had some tariff-free access to Canada’s market that they were set to lose after Brexit.
However, Canada also grants a limited amount of tariff-free access to its cheese market to the EU as part of its World Trade Organization (WTO) commitments. The side letter says that "cheese originating in the United Kingdom shall continue to be eligible to be imported into Canada under the reserve for the European Union within Canada’s WTO cheese TRQ until no later than Dec. 31, 2023."
No other market access to Canada’s supply-managed agricultural products, which includes egg and poultry as well as dairy, was granted in the new U.K. agreement.
Even after they gained new market access in Europe, Canadian livestock producers have had longstanding issues with the EU refusing to eliminate non-tariff regulatory barriers, like prohibitions on carcass washes commonly used in North American meat processing. Those issues are not resolved in the text of this transitional agreement.
Reporters in a briefing Wednesday were told this fight had to be set aside until the future bilateral negotiation because there was no appetite from the British for dealing with it.
The U.K. does not yet have its own inspection regime in place yet for these kinds of sanitary issues. The rural constituencies in which British farmers operate are also politically important to Boris Johnson’s Conservative government.
Working to ensure no disruptions
An economic impact study released by Global Affairs Canada alongside the text of the agreement found that without a deal in place, the gross domestic product of both countries would decline slightly by roughly the same amount: 0.017 per cent. The vast majority — between 87 and 94 per cent, depending on the calculation — of the trade in goods would have been duty-free regardless, because the tariffs already had been cut by both countries as part of their WTO commitments.
The study suggested 2,430 Canadian jobs could have been lost without a deal.
However, the new bill is unlikely to pass before the end of the year. The House of Commons is scheduled to rise for its holiday break on Friday.
While the government "remains hopeful" the legislation could still pass, officials could not offer any details of interim measures they’re working on with the British government to avoid new trade barriers disrupting the two-way trade in goods, services and investment with its fifth-largest trading partner.
For example, the two countries could agree not to collect tariffs otherwise payable on each other’s products until the implementation legislation is passed.
Ng said officials are looking at a "range of options" that they will be sharing with businesses as soon as possible.
Both countries have committed to negotiating a more permanent, comprehensive trade deal in the new year.
There is no sunset date for the terms of the transitional deal, but the text of the deal suggests the two parties intend to conclude their bilateral negotiation by 2024.
Key measures that had to be adjusted to take Brexit into account — like the volume of preferential trade (with low or no tariffs) allowed in key sectors like seafood, agriculture and motor vehicles — will expire in three years. This provides an incentive for both sides to take their subsequent negotiation seriously.
According to federal government policy, trade treaties are supposed to be tabled in Parliament 21 sitting days before the implementation legislation — a bill changing laws and regulations to comply with the new agreement — is introduced for debate.
Given that both the text of the treaty and its implementation bill were presented to the Commons at the same time today, this policy doesn’t appear to be followed in this case.
Process ’a train wreck’
Ratifying trade agreements is the responsibility of the federal cabinet, but before an agreement is finalized, Parliament needs to pass implementation legislation so that Canada is ready to comply on the date it takes effect.
Implementation bills can include changes to tariff schedules, intellectual property rules or health and safety regulations. Prior to the release of the legal text of this TCA, it’s not clear how much needs to be changed among the tariff rates and other rules that were already in place for trade when the British were part of the European Union.
"Waiting until the eleventh hour to introduce the implementing legislation is yet another example of Liberal mismanagement and incompetence," said Tracy Gray, the Conservative trade critic, in a media statement.
"It is up to the Liberal government to ensure that this enacting legislation is in place when the CETA expires at the end of the year. In the event the Liberals fail to do so, they must explain to businesses exactly what the trade disruptions will be."
When implementation legislation for the revised North American trade agreement was rushed through Parliament last spring, the Trudeau government agreed to opposition demands that it engage in a more comprehensive consultation process for future trade deals.
"This process has been a train wreck," said NDP trade critic Daniel Blaikie, who led the fight for assurances things would work differently the next time.
"By omitting a sunset clause, this minority government appears to have concluded a permanent trade agreement with almost no meaningful stakeholder consultation or parliamentary involvement.
"Negotiations toward a successor agreement are an opportunity to get the process right. They should involve Parliament and the public early and often. The TCA process cannot be allowed to stand as a precedent for how these deals are done."
Reporters were told in their Wednesday briefing that a public consultation process will be held before the next formal negotiations begin.